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Welfare effects of TTIP in a DSGE model

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  • Engler, Philipp
  • Tervala, Juha

Abstract

We analyze the welfare effects of the Transatlantic Trade and Investment Partnership (TTIP) between the United States (US) and the European Union (EU). Earlier TTIP studies analyze welfare effects in a framework where output and welfare coincide. We believe that the utility function of households, which depends on consumption and employment, is the best criterion for assessing TTIP. We measure the welfare effect of TTIP as the percentage of consumption that households would be willing to pay for TTIP in order to remain as well off with it as without it. The welfare effects of TTIP, which eliminates tariffs and cuts non-tariff measures, are always positive for the US and the EU. The reason is that the welfare gain of higher consumption more than offsets the welfare loss of a change in employment. The policy implication is that the US and the EU should continue the negotiations for the TTIP agreement.

Suggested Citation

  • Engler, Philipp & Tervala, Juha, 2018. "Welfare effects of TTIP in a DSGE model," Economic Modelling, Elsevier, vol. 70(C), pages 230-238.
    • Handle: RePEc:eee:ecmode:v:70:y:2018:i:c:p:230-238
    DOI: 10.1016/j.econmod.2017.11.007
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    Cited by:

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    2. Josef Bajzik & Tomas Havranek & Zuzana Irsova & Jiri Schwarz, 2019. "Estimating the Armington Elasticity: The Importance of Data Choice and Publication Bias," Working Papers IES 2019/19, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jul 2019.
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    4. Josef Bajzik & Tomas Havranek & Zuzana Irsova & Jiri Schwarz, 2019. "The Elasticity of Substitution between Domestic and Foreign Goods: A Quantitative Survey," Working Papers 2019/12, Czech National Bank.

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    More about this item

    Keywords

    Tariffs; TTIP; Trade agreement; Trade liberalization;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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