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Decomposing Welfare Changes In The Gtap Model

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  • Hertel, Thomas W.
  • Huff, Karen

Abstract

This paper develops a complete decomposition of the change in global welfare in the GTAP model. In particular, this money metric change is broken down into component parts, each of which relates to a quantity change interacting with a distortion in the model. This enables the user to assess, for example, how much of the gains from trade reform are attributable to a given commodity and/or a given region. The commodity and region specific changes in allocative efficiency can be further decomposed by transaction/tax instrument. We find that this greatly facilitates the presentation and analysis of results from GTAP. We motivate the derivation of this decomposition with the case of a one region, three commodity, analogue to the GTAP model. This permits us to focus on purely allocative efficiency effects (no terms of the trade changes). Extension to the multiregion model adds the prospect of terms of trade effects on regional EV, and the multiregion decomposition isolates the contribution of tradable price changes to regional welfare. This is demonstrated in a 3 region, 3 commodity example. Finally, we offer a more complete decomposition which takes into account the impact of changes in endowments and technology on regional welfare. This revised (2001) version introduces a number of important changes to the original (1996) paper. In particular, we build on the new final demand structure for GTAP proposed by McDougall (2001). This includes explicit recognition of changes in the marginal utility of income, as well as a per capita decomposition. We also take account of version 5.0 changes in the standard GTAP model, including the introduction of multiple international margins commodities.

Suggested Citation

  • Hertel, Thomas W. & Huff, Karen, 2001. "Decomposing Welfare Changes In The Gtap Model," Technical Papers 28708, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugttp:28708
    DOI: 10.22004/ag.econ.28708
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    Citations

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    Cited by:

    1. Hertel, Thomas & Zanetti De Lima, Cicero, 2020. "Climate Impacts on Agriculture: Searching for Keys under the Streetlight," Conference papers 333227, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    2. Cristina Cattaneo, 2008. "The Determinants of Actual Migration and the Role of Wages and Unemployment in Albania: an Empirical Analysis," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 5(1), pages 3-32, June.
    3. Boulanger, Pierre H & Dudu, Hasan & Ferrari, Emanuele & Philippidis, George, 2015. "The cost of import prohibition for political reason: CGE analysis of the Russian ban on agri-food products," Conference papers 332613, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    4. Hanslow, Kevin, 2000. "A General Welfare Decomposition For Cge Models," Technical Papers 28724, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    5. Uris L. C. Baldos & Thomas W. Hertel & Frances C. Moore, 2019. "Understanding the Spatial Distribution of Welfare Impacts of Global Warming on Agriculture and its Drivers," American Journal of Agricultural Economics, John Wiley & Sons, vol. 101(5), pages 1455-1472, October.
    6. Laborde, David & Martin, Will & van der Mensbrugghe, Dominique, 2008. "Implications of the 2008 Doha Draft Agricultural and NAMA Market Access Modalities for Developing Countries," Conference papers 331719, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    7. Sulamaa, Pekka & WidgrÉn, Mika, 2002. "EU-Enlargement and the Opening of Russia: Lessons from the GTAP Reference Model," Discussion Papers 825, The Research Institute of the Finnish Economy.
    8. Rajan Sudesh Ratna & Sachin Kumar Sharma, 2016. "Mega Trading Blocks," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 17(2), pages 181-199, September.
    9. Dissanayake, Sumali & Mahadevan, Renuka & Asafu-Adjaye, John, 2019. "Is there a role for trade liberalization in mitigating the impacts of climate change on agriculture?," Economic Analysis and Policy, Elsevier, vol. 62(C), pages 307-324.
    10. Philippidis, George, 2005. "Agricultural trade liberalisation in the Doha Round: impacts on Spain," Economia Agraria y Recursos Naturales, Spanish Association of Agricultural Economists, vol. 5(10), pages 1-28.
    11. Mohammad Kabir & Ruhul Salim, 2011. "Analysing Potential Effects of Preferential Liberalisation in Some Asian Emerging Economies," International Economic Journal, Taylor & Francis Journals, vol. 25(2), pages 191-213.
    12. Kym Anderson, 2016. "Agricultural Trade, Policy Reforms, and Global Food Security," Palgrave Studies in Agricultural Economics and Food Policy, Palgrave Macmillan, number 978-1-137-46925-0, June.
    13. Fontana, Marzia, 2006. "Modelling the gender effects of trade: current findings and ways forward," Conference papers 331535, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    14. Fontagné, Lionel & Guillin, Amélie & Mitaritonna, Cristina, 2010. "Estimations of Tariff Equivalents for the Services Sectors," Conference papers 331941, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    15. Hertel, Thomas W. & de Lima, Cicero Z., 2020. "Viewpoint: Climate impacts on agriculture: Searching for keys under the streetlight," Food Policy, Elsevier, vol. 95(C).
    16. Sorescu, Silvia & Flaig, Dorothee, 2017. "Trade facilitation impacts: approaches to model "just-in-time" delivery," Conference papers 332893, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    17. Witajewski-Baltvilks Jan & Boratyński Jakub, 2021. "Workers or Consumers: Who Pays for Low-Carbon Transition – Theoretical Analysis of Welfare Change in General Equilibrium Setting," Central European Economic Journal, Sciendo, vol. 8(55), pages 231-245, January.
    18. Terrie Walmsley & Peter Minor, 2020. "Demand shifts and willingness to pay in applied trade models," The World Economy, Wiley Blackwell, vol. 43(6), pages 1499-1520, June.
    19. Beckman, Jayson & Jones, carol Adaire & Sands, Ron, 2010. "A Global General Equilibrium Analysis of the Interactions between Biofuel Mandates and Greenhouse Gas Mitigation Policy," Conference papers 332015, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

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    Keywords

    International Relations/Trade;

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