Linking Partial and General Equilibrium Models: A GTAP Application Using TASTE
AbstractCGE models are utilized for the evaluation of trade policy reforms, yet they are typically highly aggregated, limiting their usefulness to trade negotiators interested in impacts at the tariff line. Partial Equilibrium (PE) models used for disaggregate analysis lack the benefits of an economy-wide analysis required to examine the overall impact of trade policy reforms. This suggests the need for a PE-GE, nested modeling framework to support trade policy analysis. In this paper, we develop a PE model that captures international trade, domestic consumption and output, using CET and CES structures, market clearing conditions and price linkages, nested within the standard GTAP Model. In addition, we extend the welfare decomposition of Huff and Hertel (2001) to this PE-GE model to contrast the sources of welfare gain among models. To illustrate the value-added of this model, we examine the impact of multi-lateral tariff liberalization on the Indian economy, with special focus on the auto sector, using PE, GE and PE-GE models. The PE model does not predict the change in overall size and price level for the industry well, while the GE model underestimates the aggregate welfare gain due to tariff averaging. It also fails to account for the change in industry composition resulting from trade reform. These findings are robust to wide variation in model parameters. We conclude that the linked model is superior to both the GE and PE counterparts.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University in its series GTAP Technical Papers with number 3192.
Date of creation: 2010
Date of revision:
Note: GTAP Technical Paper No. 29
Contact details of provider:
Postal: 1145 Krannert Building, West Lafayette, IN 47907-1145
Phone: (765) 494-4267
Fax: 765 494-9176
Web page: http://www.gtap.agecon.purdue.edu/
More information through EDIRC
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-17 (All new papers)
- NEP-CMP-2010-04-17 (Computational Economics)
- NEP-INT-2010-04-17 (International Trade)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Joseph Francois & Miriam Manchin & Hanna Norberg & Olga Pindyuk & Patrick Tomberger, 2013. "Reducing Transatlantic Barriers to Trade and Investment: An Economic Assessment," IIDE Discussion Papers 20130401, Institue for International and Development Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jeremy Douglas).
If references are entirely missing, you can add them using this form.