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Simulation analysis of the EU ELV/RoHS directives based on an applied general equilibrium model with Melitz-type trade specification

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  • Oyamada, Kazuhiko

Abstract

This paper explores the potential usefulness of an AGE model with the Melitz-type trade specification to assess economic effects of technical regulations, taking the case of the EU ELV/RoHS directives as an example. Simulation experiments reveal that: (1) raising the fixed exporting cost to make sales in the EU market brings results that exports of the targeted commodities (motor vehicles and parts for ELV and electronic equipment for RoHS) to the EU from outside regions/countries expand while the domestic trade in the EU shrinks when the importer's preference for variety (PfV) is not strong; (2) if the PfV is not strong, policy changes that may bring reduction in the number of firms enable survived producers with high productivity to expand production to be large-scale mass producers fully enjoying the fruit of economies of scale; and (3) When the strength of the importer's PfV is changed from zero to unity, there is the value that totally changes simulation results and their interpretations.

Suggested Citation

  • Oyamada, Kazuhiko, 2016. "Simulation analysis of the EU ELV/RoHS directives based on an applied general equilibrium model with Melitz-type trade specification," IDE Discussion Papers 587, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper587
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    References listed on IDEAS

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    10. Oyamada, Kazuhiko, 2014. "Neutrality in the choice of number of firms or level of fixed costs in calibrating an Armington-Krugman-Melitz encompassing module for applied general equilibrium models," IDE Discussion Papers 465, Institute of Developing Economies, Japan External Trade Organization(JETRO).
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    Cited by:

    1. Kazuhiko Oyamada, 2017. "Behavioral Characteristics of Applied General Equilibrium Models with Variable Elasticity of Substitution between Varieties from Different Sources," EcoMod2017 10113, EcoMod.
    2. Oyamada, Kazuhiko, 2017. "Behavioral Characteristics of Applied General Equilibrium Models with Variable Elasticity of Substitution between Varieties from Different Sources," Conference papers 332846, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

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    More about this item

    Keywords

    Macroeconomics; International trade; Econometric model; Econometrics; Applied general equilibrium; Non-tariff barriers; Preference for variety;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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