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GTAP Resource #4173

"Does Regional and Sectoral Aggregation Matter? Sensitivity Analysis in the Context of an EU-South Korea FTA"
by Ko, Jong-Hwan and Wolfgang Britz

Computable general equilibrium (CGE) models and partial equilibrium (PE) models has been widely used in the context of trade policy analysis. In such studies, a decision on the aggregation level with regard to regions and sectors is needed. Quite often, that decision is made a priori before the model runs, and a “systematic” analysis of trade policy on its impact is not undertaken. There is ample evidence that sectoral aggregation matters in trade analysis. So far, however, limited evidence exists about how the regional aggregation level affects results in CGE and PE applications. We take an FTA between EU and South Korea as an example to analyze how the sectoral and regional aggregation level affects results. The EU-Korea FTA became effective in July 2011 and thus provides a real world example which is not only of academic interest. South Korea’s agricultural markets, while showing with the exception of rice relatively low self-sufficiency levels, are generally protected by rather high tariffs. Therefore, we have an example in which some larger effects on domestic prices, consumption, production and trade patterns from an FTA are expected.

In order to analyze the effects of the EU-Korea FTA, we use the GTAP model in combination with different configurations of the GTAP data base. All configurations can be assumed “plausible” a priori in the light of “what matters in that type of analysis”: who are the important trading partners? Which sectors are expected to be most affected? Specifically, in addition to different sectoral aggregation levels, we consider different aggregation levels (1) with regard to trading partners indirectly affected by the FTA to take a closer look at trade diversion effects and (2) with regard to the regional aggregation level of the EU (one block or individual countries). Additionally, we also compare our findings from the GTAP model with the results from a PE for agricultural and food products, namely the CAPRI model to shed light o...

Resource Details (Export Citation) GTAP Keywords
Category: 2013 Conference Paper
Status: Published
By/In: Presented at the 16th Annual Conference on Global Economic Analysis, Shanghai, China
Date: 2013
Created: Ko, J. (4/15/2013)
Updated: Ko, J. (10/2/2013)
Visits: 2,373
- Model validation and sensitivity analysis
- Agricultural policies
- Preferential trading arrangements
- Asia (East)
- European Union

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