GTAP Resources: Resource Display
| GTAP Resource #7693 |
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"Evolution of trade theories and technological change endogeneity in macroeconomic models" by Trachanas, Georgios, Konstantinos-Ernestos Kostas, Marc Vielle, Alain Haurie, Frédéric Babonneau, Eleftheria Zisarou, Panagiotis Fragkos, Maria Iro Baka, Lorenza Campagnolo, Paola Rocchi, Elisa Delpiazzo, Ramon Key, Amsalu Woldie Yalew, Konstantinos Koasidis and Alexandros Nikas Abstract Since early large-scale macroeconomic modelling, trade and technological change have typically been represented through simplified assumptions. This paper conducts two systematic literature reviews using Scopus—one on trade theory and one on endogenous technological change (ETC)—to assess how more advanced mechanisms have been incorporated into CGE and macroeconomic models. On the trade side, we find that the Armington assumption remains dominant due to its tractability, despite its inability to capture firm heterogeneity, selection effects, and new export varieties. Krugman-type models introduce demand-side variety effects but are less suitable in multi-region settings. Melitz-type frameworks provide a more complete representation, capturing both variety and productivity effects and allowing trade-induced changes in firm composition, which are crucial for analysing trade cost policies. However, their implementation remains limited due to computational complexity, data requirements, and numerical instability, leading many studies to adopt hybrid approaches that approximate Melitz within an Armington structure. On the technological change side, the literature shows a shift from exogenous to endogenous representations, mainly through learning-by-doing and R&D-based knowledge accumulation, often complemented by spillover effects linked to trade and investment. While these approaches enhance realism, they introduce conceptual, empirical, and computational challenges, including conflicts with standard CGE assumptions, parameter uncertainty, and increased non-linearity. Overall, although modelling has progressed significantly, the full integration of advanced trade and ETC mechanisms in large-scale models remains constrained, requiring simplifications or partial adoption. |
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- Climate change policy - Trade and the environment - Bridging CGE and new quantitative trade (NQT) literature - Global |
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Public Access  GTAP Resource 7693 (81.3 KB) Replicated: 0 time(s)Restricted Access No documents have been attached. Special Instructions No instructions have been specified. |
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Last Modified: 3/16/2026 10:39:15 AM
