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Using the new products margin to predict the industry-level impact of trade reform

Listed author(s):
  • Kehoe, Timothy J.
  • Rossbach, Jack
  • Ruhl, Kim J.

This paper develops a methodology for predicting the impact of trade liberalization on exports by industry (3-digit ISIC) based on the pre-liberalization distribution of exports by product (5-digit SITC). We evaluate the ability of our methodology to account for the industry-level variation in export growth by using our model to “predict” the growth in industry trade from the North American Free Trade Agreement (NAFTA). We show that our method performs significantly better than the applied general equilibrium models originally used for the policy evaluation of NAFTA. We find that the most important products in our analysis are not the ones with zero pre-liberalization trade, but those with positive, yet small amounts of pre-liberalization trade.

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File URL: http://www.sciencedirect.com/science/article/pii/S0022199615000586
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Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 96 (2015)
Issue (Month): 2 ()
Pages: 289-297

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Handle: RePEc:eee:inecon:v:96:y:2015:i:2:p:289-297
DOI: 10.1016/j.jinteco.2015.03.004
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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  2. Simonovska, Ina & Waugh, Michael E., 2014. "The elasticity of trade: Estimates and evidence," Journal of International Economics, Elsevier, vol. 92(1), pages 34-50.
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