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Consistent Trade Policy Aggregation

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  • James E. Anderson

Abstract

Most empirical policy work requires policy aggregation. Trade policy aggregation exemplifies the aggregation problem poignantly, with thousands of highly dispersed trade barriers. This article 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 multicountry policy modeling. An application to India shows that the standard atheoretic method of aggregation overstates India's real income by around three times the global gains from free trade. Copyright © (2009) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • 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, August.
  • Handle: RePEc:ier:iecrev:v:50:y:2009:i:3:p:903-927
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    References listed on IDEAS

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    1. James E. Anderson & J. Peter Neary, 2005. "Measuring the Restrictiveness of International Trade Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262012200.
    2. Lawrence H. Goulder & Roberton C. Williams III, 2003. "The Substantial Bias from Ignoring General Equilibrium Effects in Estimating Excess Burden, and a Practical Solution," Journal of Political Economy, University of Chicago Press, vol. 111(4), pages 898-927, August.
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    Cited by:

    1. Himics, Mihaly & Listorti, Giulia & Tonini, Axel, 2020. "Simulated economic impacts in applied trade modelling: A comparison of tariff aggregation approaches," Economic Modelling, Elsevier, vol. 87(C), pages 344-357.
    2. repec:laf:wpaper:201101 is not listed on IDEAS
    3. Anderson, Kym & Martin, Will & van der Mensbrugghe, Dominique, 2013. "Estimating Effects of Price-Distorting Policies Using Alternative Distortions Databases," Handbook of Computable General Equilibrium Modeling, in: Peter B. Dixon & Dale Jorgenson (ed.), Handbook of Computable General Equilibrium Modeling, edition 1, volume 1, chapter 0, pages 877-931, Elsevier.
    4. Antoine Bouet & Valdete Berisha-Krasniqui & Valdete Berisha-Krasniqui & Carmen Estrades & David Laborde, 2011. "Trade and investment in Latin America and Asia : Potential perspectives from further integration," Larefi Working Papers 1101, Larefi, Université Bordeaux 4.
    5. Will Martin & Kym Anderson, 2007. "The Doha agenda and agricultural trade reform: the role of economic analysis," Agricultural Economics, International Association of Agricultural Economists, vol. 37(s1), pages 77-87, December.
    6. Kym Anderson, 2016. "Contributions Of The Gatt/Wto To Global Economic Welfare: Empirical Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 30(1), pages 56-92, February.
    7. Himics, Mihaly & Listorti, Giulia & Tonini, Axel, 2017. "Advanced tariff aggregation in global trade models: dismantling tariffs on the Swiss beef market," 2017 International Congress, August 28-September 1, 2017, Parma, Italy 261284, European Association of Agricultural Economists.
    8. Berisha-Krasniqi, Valdete & Bouet, Antoine & Estrades, Carmen & Laborde, David, 2011. "Trade and investment in Latin America and Asia: Lessons from the past and potential perspectives from further integration," IFPRI discussion papers 1060, International Food Policy Research Institute (IFPRI).
    9. Narayanan, Badri G. & Hertel, Thomas W. & Horridge, J. Mark, 2010. "Disaggregated data and trade policy analysis: The value of linking partial and general equilibrium models," Economic Modelling, Elsevier, vol. 27(3), pages 755-766, May.
    10. Bouët, Antoine & Berisha-Krasniqi, Valdete & Estrades, Carmen & Laborde, David, 2012. "Trade and investment in Latin America and Asia: Perspectives from further integration," Journal of Policy Modeling, Elsevier, vol. 34(2), pages 193-210.
    11. David Laborde & Will Martin & Dominique van der Mensbrugghe, 2017. "Measuring the Impacts of Global Trade Reform with Optimal Aggregators of Distortions," Review of International Economics, Wiley Blackwell, vol. 25(2), pages 403-425, May.
    12. van der Mensbrugghe, Dominique, 2013. "Modeling the Global Economy – Forward-Looking Scenarios for Agriculture," Handbook of Computable General Equilibrium Modeling, in: Peter B. Dixon & Dale Jorgenson (ed.), Handbook of Computable General Equilibrium Modeling, edition 1, volume 1, chapter 0, pages 933-994, Elsevier.
    13. Yaghoob Jafari & Mihaly Himics & Wolfgang Britz & Jayson Beckman, 2021. "It is all in the details: A bilateral approach for modelling trade agreements at the tariff line," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 69(3), pages 415-442, September.
    14. Himics, Mihály & Britz, Wolfgang, 2016. "Flexible and welfare-consistent tariff aggregation over exporter regions," Economic Modelling, Elsevier, vol. 53(C), pages 375-387.
    15. Hakan Yilmazkuday, 2021. "Drivers of Global Trade: A Product-Level Investigation," International Economic Journal, Taylor & Francis Journals, vol. 35(4), pages 469-485, October.
    16. Narayanan, Badri & Thomas Hertel & Mark Horridge, 2010. "Linking Partial and General Equilibrium Models: A GTAP Application Using TASTE," GTAP Technical Papers 3192, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    17. Beyhan Bektasoglu & Tanja Engelbert & Martina Brockmeier, 2017. "The Effect of Aggregation Bias: An NTB-modelling Analysis of Turkey's Agro-food Trade with the EU," The World Economy, Wiley Blackwell, vol. 40(10), pages 2255-2276, October.

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    More about this item

    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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