ASEAN FTA, distribution of income, and globalization
This paper examines the impact of Free Trade Agreements on income distribution within the Association of Southeast Asian Nations (ASEAN) and between the members and their trading partners outside ASEAN. The study uses a Computable General Equilibrium model, a modified version of the 57 sector, 87 country, Global Trade Analysis Project (GTAP) integrated model of national input-output tables, version-6.2 (2001 database) with its reserve matrix facility, to simulate income distribution results as an outcome of certain parameter changes that appear in intra and inter regional trade. Within ASEAN, trade liberalization will stimulate the output of each country within the region according to their comparative advantage. Since trade liberalization tends to increase output of capital-intensive goods more than labor-intensive goods, the less-developed countries within the region tend to get smaller benefits compared to other member countries. In addition, the physical means of production tend to gain more relative to the gains of labor from the FTAs. This tends to widen the income gap between high-income and low-income households within ASEAN. Comparing ASEAN and the developed non-ASEAN countries, an FTA within ASEAN tends to reduce the returns to labor of the developed non-member countries and narrow the income gap between ASEAN, as a whole, and those rich countries since capital-intensive products of developing countries are often labor-intensive goods of developed countries.
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- Dipti Prakas Pal & Erik Dietzenbacher & Dipika Basu, 2007. "Economic Integration: Systemic Measures in an Input-Output Framework," Economic Systems Research, Taylor & Francis Journals, vol. 19(4), pages 397-408.
- Deardorff, A.V., 2000. "Developing Countries Growth and Developed Country Response," Working Papers 462, Research Seminar in International Economics, University of Michigan.
- Huanguang Qiu & Jun Yang & Jikun Huang & Ruijian Chen, 2007. "Impact of China-ASEAN Free Trade Area on China's International Agricultural Trade and Its Regional Development," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 15(5), pages 77-90.
- Francois, Joseph, 1998. "Scale Economies and Imperfect Competition in the GTAP Model," GTAP Technical Papers 317, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
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