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Simulation Analysis of EU ELV/RoHS Directives Based on an Applied General Equilibrium Model with Melitz-type Trade Specification

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  • Oyamada, Kazuhiko
  • Nabeshima, Kaoru
  • Michida, Etsuyo

Abstract

Modeling non-tariff barriers (NTBs) has long been a challenge for builders of applied general equilibrium (AGE) models, since NTBs are not straightforwardly connectable to economic variables included in a model unlike taxes or tariffs, in addition to the fact that information on NTBs is not easy to collect, sort out complication, or quantitatively evaluate. Non-tariff measures are introduced in order not only to protect local industries, but also to regulate the domestic market. In consequence, NTBs may generate different kinds of economic effects, i.e., protection effects as well as supply- and demand-shifting effects (Fugazza and Maur (2008)). Protection effects may be generated by measures which restrict trade raising cost. Supply-shifting effects may be caused by regulations which specify and affect production processes, such that prevent the sales of hazardous products and create standards to increase compatibility and interoperability. Demand-shifting effects may be brought by rules which affect consumers behaviors, such that obligate to provide certain information related to the sold commodity. Protection effects can be assessed by two different approaches. One approach uses ad-valorem equivalent (AVE) estimates of NTBs based on the difference between the world price and the domestic price in the importing or exporting country, which has been adopted by previous AGE analyses, such as Andriamananjara, Ferrantino and Tsigas (2003) and Fugazza and Maur (2008). Another one focuses on the additional cost of production that firms have to bear in order to export to a specific market. This kind of cost is considered by the seminal work of Melitz (2003) where within-industry resource allocation among heterogeneous firms plays an important role. The purpose of this study is to show the usefulness of an AGE model with the Melitz-type trade specification in assessing the impact of technical regulations, taking the case of European Union (EU) Restriction of Hazard...

Suggested Citation

  • Oyamada, Kazuhiko & Nabeshima, Kaoru & Michida, Etsuyo, 2015. "Simulation Analysis of EU ELV/RoHS Directives Based on an Applied General Equilibrium Model with Melitz-type Trade Specification," Conference papers 332610, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:332610
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