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China's potential future growth and gains from trade policy bargaining: Some numerical simulation results

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  • Li, Chunding
  • Whalley, John
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    Abstract

    Numerical simulation analysis of bargaining solutions is little developed in existing literature. In this paper, we use a numerical general equilibrium model which captures China and her major trading partners and examine the outcomes of trade policy bargaining solutions (bargaining over tariffs and financial transfers) over time, and then measure both absolute and relative gains to China from trade bargaining. These measurements are important for policy making. Our simulation results indicate that China's welfare gain from trade bargaining will increase over time if countries keep their present higher GDP growth rates for several decades, but there are major difference when using different bargaining solution concepts. These differences have not been noted in existing literature but have an intuitive explanation. Our results also indicate that if China jointly bargains along with India, Brazil and other developing countries with the OECD, and when we use PPP to adjust China's relative GDP size China's gain will further increase.

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    Bibliographic Info

    Article provided by Elsevier in its journal Economic Modelling.

    Volume (Year): 37 (2014)
    Issue (Month): C ()
    Pages: 65-78

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    Handle: RePEc:eee:ecmode:v:37:y:2014:i:c:p:65-78

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    Web page: http://www.elsevier.com/locate/inca/30411

    Related research

    Keywords: Bargaining solutions; Welfare gain; General equilibrium; Numerical simulations;

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    1. Raphael Trifon & Moshe Landau, 1974. "A Model of Wage Bargaining Involving Negotiations and Sanctions," Management Science, INFORMS, INFORMS, vol. 20(6), pages 960-970, February.
    2. Roth, Alvin E. & Vesna Prasnikar & Masahiro Okuno-Fujiwara & Shmuel Zamir, 1991. "Bargaining and Market Behavior in Jerusalem, Ljubljana, Pittsburgh, and Tokyo: An Experimental Study," American Economic Review, American Economic Association, American Economic Association, vol. 81(5), pages 1068-95, December.
    3. Shoven,John B. & Whalley,John, 1992. "Applying General Equilibrium," Cambridge Books, Cambridge University Press, number 9780521319867, 9.
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    11. Thomson, William, 1983. "Problems of fair division and the Egalitarian solution," Journal of Economic Theory, Elsevier, Elsevier, vol. 31(2), pages 211-226, December.
    12. Coles, Melvyn G & Muthoo, Abhinay, 1998. "Strategic Bargaining and Competitive Bidding in a Dynamic Market Equilibrium," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 65(2), pages 235-60, April.
    13. Harry G. Johnson, 1965. "An Economic Theory of Protectionism, Tariff Bargaining, and the Formation of Customs Unions," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 73, pages 256.
    14. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, Econometric Society, vol. 18(2), pages 155-162, April.
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