Most empirical policy work requires the aggregation of policies. Trade policy aggregation exemplifies the aggregation problem poignantly, with thousands of highly dispersed trade barriers. This paper provides methods of policy aggregation that are consistent with two common objectives of empirical work. One is to preserve real income. The other is to preserve the real volume of activity in the parts of the economy being aggregated. Both objectives must be achieved for consistent multi-country policy modeling. An application to India shows that the standard atheoretic method of aggregation overstates India's real income by around 3 times the global gains from free trade.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
14046.
Length: Date of creation: May 2008 Date of revision: Handle: RePEc:nbr:nberwo:14046
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Article
James E. Anderson, 2009.
"Consistent Trade Policy Aggregation,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(3), pages 903-927, 08.
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Find related papers by JEL classification: C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models F10 - International Economics - - Trade - - - General F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
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