Measures of Trade Openness Using CGE Analysis
AbstractWhile a number of measures of openness have been used in empirical studies, none has a theoretical derivation. Using cge models of an economy, this paper derives a number of measures of opennesss which lie on the unit interval and have a welfare interpretation. One group of measure are transformations of the Uniform Tariff Equivalent which are zero for a closed economy and unity for a completely open economy, and have the property that national welfare increases monotonically with the measures of openess. An alternative measure is calculated as the ratio of the volume of trade in a restricted trade situation to that under the free trade situation. These measures are calculated for 8 regions of the world economy, using the GTAP model. We find close correspondence between all the cge measures but the ranking of countries according to these measures differs substantially from that of the actual trade ratios which are most commonly used in empirical studies.
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Bibliographic InfoPaper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 659.
Length: 18 pages
Date of creation: 1998
Date of revision:
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INTERNATIONAL TRADE ; ECONOMIC MODELS;
Other versions of this item:
- F10 - International Economics - - Trade - - - General
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
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