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The Welfare Analysis of a Free Trade Zone: Intermediate Goods and the Asian Tigers

  • Andrew Feltenstein
  • Florenz Plassmann

We analyse trade reform among the ASEAN countries, which recently began removing all mutual trade barriers. The standard method to avoid complete specialisation in traded goods is to distinguish goods both by physical type and place of origin (the so-called Armington assumption). This methodology is not suitable for the sort of intermediate goods produced by the ASEAN countries. We develop a computational approach in the context of a non-Armington dynamic general equilibrium model. Analysing the results of a calibrated version of the model, we find that trade liberalisation is generally welfare improving for the ASEAN countries. Copyright 2008 The Authors. Journal compilation 2008 Blackwell Publishing Ltd.

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Article provided by Wiley Blackwell in its journal World Economy.

Volume (Year): 31 (2008)
Issue (Month): 7 (07)
Pages: 905-924

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Handle: RePEc:bla:worlde:v:31:y:2008:i:7:p:905-924
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  1. Feltenstein, Andrew, 1997. "An Analysis of the Implications for the Gold Mining Industry of Alternative Tax Policies: A Regional Disaggregated Model for Australia," The Economic Record, The Economic Society of Australia, vol. 73(223), pages 305-13, December.
  2. de Melo, Jaime, 1988. "Computable general equilibrium models for trade policy analysis in developing countries: A survey," Journal of Policy Modeling, Elsevier, vol. 10(4), pages 469-503.
  3. Morgan, William & Mutti, John & Rickman, Dan, 1996. "Tax Exporting, Regional Economic Growth, and Welfare," Journal of Urban Economics, Elsevier, vol. 39(2), pages 131-159, March.
  4. Andrew Feltenstein, 2000. "Bank Failures and Fiscal Austerity; Policy Presecriptions for a Developing Country," IMF Working Papers 00/90, International Monetary Fund.
  5. Plassmann, Florenz, 2005. "The advantage of avoiding the Armington assumption in multi-region models," Regional Science and Urban Economics, Elsevier, vol. 35(6), pages 777-794, November.
  6. Johannes Bröcker & Martin Schneider, 2002. "How Does Economic Development in Eastern Europe Affect Austria's Regions? A Multiregional General Equilibrium Framework," Journal of Regional Science, Wiley Blackwell, vol. 42(2), pages 257-285.
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