IDEAS home Printed from https://ideas.repec.org/p/cop/wpaper/g-333.html
   My bibliography  Save this paper

Introducing the effects of foreign direct investment into the GTAP-GAC model

Author

Listed:
  • Peter B. Dixon
  • Maureen T. Rimmer

Abstract

Since 2018, we have built a series of GTAP models for Global Affairs Canada (GAC). Each of these models introduces modifications to the standard GTAP model. This paper describes GTAP-GAC3 in which we add an FDI extension. Our main focus is on the role of foreignaffiliate production as a substitute for imports and thereby a method for getting behind a tariff wall. GTAP-GAC3 could also be used for investigating scenarios in which FDI is motivated by productivity effects. Relative to other CGE models that incorporate FDI, GTAP-GAC3 has several advantages, including: year-on-year dynamics; realistic labour-market responses and high levels of commodity and country disaggregation. As explained in the paper, these advantages are achieved mainly by simplifications in demand-side specifications relative to those in other FDI-extended CGE models. By comparing GTAP-GAC3 tariff simulations conducted without and with the FDI extension, we show that FDI can have significant implications for simulation results.

Suggested Citation

  • Peter B. Dixon & Maureen T. Rimmer, 2022. "Introducing the effects of foreign direct investment into the GTAP-GAC model," Centre of Policy Studies/IMPACT Centre Working Papers g-333, Victoria University, Centre of Policy Studies/IMPACT Centre.
    • Handle: RePEc:cop:wpaper:g-333
    as

    Download full text from publisher

    File URL: https://www.copsmodels.com/ftp/workpapr/g-333.pdf
    File Function: Initial version, 2022-08
    Download Restriction: no
    File URL: https://www.copsmodels.com/elecpapr/g-333.htm
    File Function: Local abstract: may link to additional material.
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Lakatos, Csilla & Fukui, Tani, 2014. "The Liberalization of Retail Services in India," World Development, Elsevier, vol. 59(C), pages 327-340.
    2. Peter B. Dixon & Maureen Rimmer & Nhi Tran, 2020. "Creating a Disaggregated CGE Model for Trade Policy Analysis: GTAP-MVH," Foreign Trade Review, , vol. 55(1), pages 42-79, February.
    3. Erwin Corong & Thomas Hertel & Robert McDougall & Marinos Tsigas & Dominique van der Mensbrugghe, 2017. "The Standard GTAP Model, version 7," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 2(1), pages 1-119, June.
    4. Fukui, Tani & Csilla Lakatos, 2012. "A Global Database of Foreign Affiliate Sales," GTAP Research Memoranda 4009, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lionel Fontagné & Jean Fouré & Alexander Keck, 2017. "Simulating World Trade in the Decades Ahead: Driving Forces and Policy Implications," The World Economy, Wiley Blackwell, vol. 40(1), pages 36-55, January.
    2. Jia, Zhijie & Lin, Boqiang, 2022. "CEEEA2.0 model: A dynamic CGE model for energy-environment-economy analysis with available data and code," Energy Economics, Elsevier, vol. 112(C).
    3. Lars Nilsson, 2019. "Reflections on the economic modelling of free trade agreements," DG TRADE Chief Economist Notes 2019-2, Directorate General for Trade, European Commission.
    4. Dixon, Peter B. & Rimmer, Maureen T., 2022. "Winners and losers in global supply chain trade: Embedding GSC in CGE," Economic Modelling, Elsevier, vol. 106(C).
    5. Latorre, María C. & Yonezawa, Hidemichi, 2018. "Stopped TTIP? Its potential impact on the world and the role of neglected FDI," Economic Modelling, Elsevier, vol. 71(C), pages 99-120.
    6. Gómez-Plana, Antonio G. & Latorre, María C., 2014. "When multinationals leave: A CGE analysis of the impact of divestments," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 8, pages 1-41.
    7. Philippidis, George & M'Barek, Robert & Urban-Boysen, Kirsten & Van Zeist, Willem-Jan, 2023. "Exploring economy-wide sustainable conditions for EU bio-chemical activities," Ecological Economics, Elsevier, vol. 210(C).
    8. Bekkers, Eddy & Schroeter, Sofia, 2020. "An economic analysis of the US-China trade conflict," WTO Staff Working Papers ERSD-2020-04, World Trade Organization (WTO), Economic Research and Statistics Division.
    9. Léo Coppens & Simon Dietz & Frank Venmans, 2024. "Optimal Climate Policy under Exogenous and Endogenous Technical Change: Making Sense of the Different Approaches," CESifo Working Paper Series 11059, CESifo.
    10. Nelson Villoria & Rachael Garrett & Florian Gollnow & Kimberly Carlson, 2022. "Leakage does not fully offset soy supply-chain efforts to reduce deforestation in Brazil," Nature Communications, Nature, vol. 13(1), pages 1-10, December.
    11. Tsigas, Marinos & Yuan, Wen Jin, 2018. "Quantifying the Economic Impact of U.S. Offshoring Activities in China and Mexico: A-FDI Model Perspective," Conference papers 332981, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    12. Lakatos, Csilla & Fukui, Tani, 2014. "The Liberalization of Retail Services in India," World Development, Elsevier, vol. 59(C), pages 327-340.
    13. Alviarez, Vanessa, 2019. "Multinational production and comparative advantage," Journal of International Economics, Elsevier, vol. 119(C), pages 1-54.
    14. Mun Ho & Wolfgang Britz & Ruth Delzeit & Florian Leblanc & Roberto Roson & Franziska Schuenemann & Matthias Weitzel, 2020. "Modelling Consumption and Constructing Long-Term Baselines in Final Demand," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 5(1), pages 63-108, June.
    15. Saad Ahmad & Jeffrey Bergstrand & Jordi Paniagua & Heather Wickramarachi, 2025. "The Multinational Revenue, Employment, and Investment Database (MREID)," Review of International Economics, Wiley Blackwell, vol. 33(4), pages 817-836, September.
    16. Rumiana Górska, 2022. "Sectoral effects of the Japan-EU Economic Partnership Agreement for the European Union countries," Asia Europe Journal, Springer, vol. 20(2), pages 99-114, June.
    17. James R. Stevenson & Karen Macours & Douglas Gollin, 2023. "The Rigor Revolution: New Standards of Evidence for Impact Assessment of International Agricultural Research," Annual Review of Resource Economics, Annual Reviews, vol. 15(1), pages 495-515, October.
    18. Xuefeng Wang & Ling Zhu & Haiyun Liu, 2024. "Effects of foreign direct investment in services on input imports of manufacturing firms: Evidence from China," Review of International Economics, Wiley Blackwell, vol. 32(3), pages 1434-1461, August.
    19. Jean Chateau & Hugo Rojas-Romagosa & Sneha D Thube & Dominique van der Mensbrugghe, 2025. "IMF-ENV: Integrating Climate, Energy, and Trade Policies in a General Equilibrium Framework," IMF Working Papers 2025/077, International Monetary Fund.
    20. Roson, Roberto, 2022. "Education, Labor Force Composition, and Growth A General Equilibrium Analysis," Conference papers 333421, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cop:wpaper:g-333. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mark Horridge (email available below). General contact details of provider: https://edirc.repec.org/data/cpmonau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.