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GTAP Resource #3127

"Infrastructure and Trade in Sub-Saharan Africa: Costs and Benefits of Reforms"
by Mirza, Tasneem

This paper designs a framework to analyze the costs and benefits of trade facilitation reforms within an applied general equilibrium model. The existing literature simulates impacts of improving border logistics within CGE models by increasing trade-related productivity which reduces effective prices and increases trading competitiveness. In these models costs of trade-related technology improvements are not modeled explicitly. However, border related investments, such as building additional ports, or simplifying customs procedures through institutional reforms, require substantial fixed costs. This paper attempts to overcome the ‘free’ technology improvement shocks used in CGE models by providing structure to the costs of border investments.

This paper extends the standard GTAP model to incorporate provisions of trade facilitation such that both costs and benefits may be analyzed. In particular, trade facilitation involves investing on border-related capital goods that improve border efficiency. Since resources are limited, the opportunity cost of investing on such capital is to produce alternative consumables. Each economy funds the provision of border-related capital goods through tax revenues that accrue to the regional household’s income. Modeling investments as a produced fully endogenizes costs of facilitation and allows a general equilibrium analysis that can predict both direct impacts of reforms from technology improvements and indirect impacts through tax effects.

Resource Details (Export Citation) GTAP Keywords
Category: 2009 Conference Paper
Status: Published
By/In: Presented at the 12th Annual Conference on Global Economic Analysis, Santiago, Chile
Date: 2009
Created: Mirza, T. (4/15/2009)
Updated: Mirza, T. (12/3/2010)
Visits: 3,023
- Asia (East)
- Africa (Southern)

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