Trade Liberalization in General Equilibrium: Intertemporal and Inter-Industry Effects
This paper uses a dynamic computable general equilibrium model to simulate the effects of unilateral reductions by the U.S. in tariffs and "voluntary" export restraints (VER's). We consider 50 percent cuts in tariffs and in ad valorem VER equivalents, separately and in combination. The model features intertemporal optimization by households and firms, explicit adjustment dynamics, an integrated treatment of the current and capital accounts of the balance of payments, and industry disaggregation. Central findings include: (1) VER's are considerably more significant than tariffs in terms of the magnitude of the macroeconomic effects induced by their reduction; (2) while VER reductions enhance domestic welfare, unilateral tariff cuts reduce domestic welfare (as a consequence of U.S. monopsony power and associated adverse terms of trade effects); (3) international capital movements critically regulate the responses of the U.S. and foreign economies to these trade initiatives and produce significant differences between short and long-run effects; and (4) effects differ substantially across industries. Together, these findings indicate that simulation analyses that disregard international capital movements, adjustment dynamics, and industry differences may generate seriously misleading results.
(This abstract was borrowed from another version of this item.)
|Date of creation:||01 May 1989|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (510) 642-1922
Fax: (510) 642-5018
Web page: http://www.escholarship.org/repec/iber_econ/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Goulder, Lawrence H. & Summers, Lawrence H., 1989.
"Tax policy, asset prices, and growth : A general equilibrium analysis,"
Journal of Public Economics,
Elsevier, vol. 38(3), pages 265-296, April.
- Lawrence H. Goulder & Lawrence H. Summers, 1987. "Tax Policy, Asset Prices, and Growth: A General Equilibrium Analysis," NBER Working Papers 2128, National Bureau of Economic Research, Inc.
- Brecher, Richard A. & Diaz Alejandro, Carlos F., 1977. "Tariffs, foreign capital and immiserizing growth," Journal of International Economics, Elsevier, vol. 7(4), pages 317-322, November.
- Mussa, Michael, 1978. "Dynamic Adjustment in the Heckscher-Ohlin-Samuelson Model," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 775-91, October.
- Russell S. Boyer, 1977. "Commercial Policy under Alternative Exchange Rate Regimes," Canadian Journal of Economics, Canadian Economics Association, vol. 10(2), pages 218-32, May.
- Grandmont, Jean-Michel, 1993.
"Temporary general equilibrium theory,"
Handbook of Mathematical Economics,
in: K. J. Arrow & M.D. Intriligator (ed.), Handbook of Mathematical Economics, edition 4, volume 2, chapter 19, pages 879-922
- James M. Poterba & Lawrence H. Summers, 1984.
"The Economic Effects of Dividend Taxation,"
343, Massachusetts Institute of Technology (MIT), Department of Economics.
- Ray C. Fair & John B. Taylor, 1980.
"Solution and Maximum Likelihood Estimation of Dynamic Nonlinear Rational Expectations Models,"
Cowles Foundation Discussion Papers
564, Cowles Foundation for Research in Economics, Yale University.
- Fair, Ray C & Taylor, John B, 1983. "Solution and Maximum Likelihood Estimation of Dynamic Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 51(4), pages 1169-85, July.
- Ray C. Fair & John B. Taylor, 1980. "Solution and Maximum Likelihood Estimation of Dynamic Nonlinear RationalExpectations Models," NBER Technical Working Papers 0005, National Bureau of Economic Research, Inc.
- Shiells, C.R. & Stern, R.M. & Deardorff, A.V., 1988.
"Estimates Of The Elasticities Of Substitution Between Imports And Home Goods For The United States: Reply,"
235, Research Seminar in International Economics, University of Michigan.
- Clinton Shiells & Robert Stern & Alan Deardorff, 1989. "Estimates of the elasticities of substitution between imports and home goods for the United States: Reply," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 125(2), pages 371-374, June.
- Darrell Duffie & William Zame, 1988.
"The Consumption-Based Capital Asset Pricing Model,"
88-10, University of Copenhagen. Department of Economics.
- Lawrence H. Goulder & Barry Eichengreen, 1989.
"Savings Promotion, Investment Promotion, and International Competitiveness,"
in: Trade Policies for International Competitiveness, pages 5-52
National Bureau of Economic Research, Inc.
- Lawrence H. Goulder & Barry Eichengreen, 1988. "Savings Promotion, Investment Promotion, and International Competitiveness," NBER Working Papers 2635, National Bureau of Economic Research, Inc.
- Adler, Michael & Dumas, Bernard, 1983. " International Portfolio Choice and Corporation Finance: A Synthesis," Journal of Finance, American Finance Association, vol. 38(3), pages 925-84, June.
- Robert E. Hall, 1985. "Real Interest and Consumption," NBER Working Papers 1694, National Bureau of Economic Research, Inc.
- Feenstra, Robert C., 1985. "Automobile prices and protection: The U.S.-Japan trade restraint," Journal of Policy Modeling, Elsevier, vol. 7(1), pages 49-68.
- Smith, C. E., 1988. "Output effects of a tariff under flexible exchange rates," Journal of International Economics, Elsevier, vol. 24(3-4), pages 359-371, May.
- James M. Poterba & Julio J. Rotemberg, 1986.
"Money in the Utility Function: An Empirical Implementation,"
NBER Working Papers
1796, National Bureau of Economic Research, Inc.
- James M. Poterba & Julio J. Rotemberg, 1986. "Money in the Utility Function: An Empirical Implementation," Working papers 408, Massachusetts Institute of Technology (MIT), Department of Economics.
- Smith, M A M, 1977. "Capital Accumulation in the Open Two-Sector Economy," Economic Journal, Royal Economic Society, vol. 87(346), pages 273-82, June.
- Robert E. Baldwin & Carl B. Hamilton & Andre Sapir, 1988.
"Issues in US-EC Trade Relations,"
National Bureau of Economic Research, Inc, number bald88-1, July.
- Ishii, Naoko & McKibbin, Warwick & Sachs, Jeffrey, 1985. "The economic policy mix, policy cooperation, and protectionism: Some aspects of macroeconomic interdependence among the United States, Japan, and other OECD countries," Journal of Policy Modeling, Elsevier, vol. 7(4), pages 533-572.
- Lawrence H. Summers, 1981. "Taxation and Corporate Investment: A q-Theory Approach," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(1), pages 67-140.
- Rachel McCulloch & Maurice R. Greenberg & Lionel H. Olmer, 1988.
"International Competition in Services,"
in: The United States in the World Economy, pages 367-422
National Bureau of Economic Research, Inc.
- Randall Wigle, 1988. "General Equilibrium Evaluation of Canada-U.S. Trade Liberalization in a Global Context," Canadian Journal of Economics, Canadian Economics Association, vol. 21(3), pages 539-64, August.
- Warwick J. McKibbin & Jeffrey Sachs, 1986. "Coordination of Monetary and Fiscal Policies in the OECD," NBER Working Papers 1800, National Bureau of Economic Research, Inc.
- Eichengreen, Barry J., 1981. "A dynamic model of tariffs, output and employment under flexible exchange rates," Journal of International Economics, Elsevier, vol. 11(3), pages 341-359, August.
When requesting a correction, please mention this item's handle: RePEc:cdl:econwp:qt0ws6559g. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Schiff)
If references are entirely missing, you can add them using this form.