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Liberalization and Capital Accumulation in the GTAP Model

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  • Francois, Joseph
  • Bradley McDonald

Abstract

1996, July This paper explores trade policy and investment linkages in the GTAP Model. This is done under alternative steady-state closure rules linking trade to consumption, production, and investment, and emphasizing the general equilibrium nature of capital accumulation mechanisms. When policy shocks are capital friendly, induced investment may be greater than suggested by current savings rates. As a result, multiplier-type analysis can be very misleading. The importance and direction of this magnification hinges critically on the sensitivity of savings rates with respect to real returns. As illustration, we offer a numerical assessment of the Uruguay Round, highlighting such linkages.

Suggested Citation

  • Francois, Joseph & Bradley McDonald, 1996. "Liberalization and Capital Accumulation in the GTAP Model," GTAP Technical Papers 310, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  • Handle: RePEc:gta:techpp:310
    Note: GTAP Technical Paper No. 07
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    References listed on IDEAS

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    1. Samuelson, Paul A., 1975. "Trade pattern reversals in time-phased Ricardian systems and intertemporal efficiency," Journal of International Economics, Elsevier, vol. 5(4), pages 309-363, November.
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    3. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-963, September.
    4. Lawrence H. Goulder & Barry Eichengreen, 1992. "Trade Liberalization in General Equilibrium: Intertemporal and Inter-industry Effects," Canadian Journal of Economics, Canadian Economics Association, vol. 25(2), pages 253-280, May.
    5. Baldwin, Richard E, 1992. "Measurable Dynamic Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 162-174, February.
    6. Haaland, Jan I., 1994. "The Uruguay Round and Trade in Manufactures and Services. General Equilibrium Simulations of Production, Trade and Welfare Effects of Liberalization," CEPR Discussion Papers 1008, C.E.P.R. Discussion Papers.
    7. Laurence J. Kotlikoff, 1989. "What Determines Savings?," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262611872, September.
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    Cited by:

    1. Francois, Joseph F. & McQueen, Matthew & Wignaraja, Ganeshan, 2005. "European Union-developing country FTAs: overview and analysis," World Development, Elsevier, vol. 33(10), pages 1545-1565, October.
    2. Moreno ROMA & Paul HIEBERT, 2010. "Relative House Price Dynamics Across Euro Area and US Cities: Convergence or Divergence?," EcoMod2010 259600143, EcoMod.
    3. Hertel, Thomas, 2013. "Global Applied General Equilibrium Analysis Using the Global Trade Analysis Project Framework," 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 815-876, Elsevier.
    4. Rivera, Luis & Rojas-Romagosa, Hugo, 2010. "Human capital formation and the linkage between trade and poverty: the cases of Costa Rica and Nicaragua," Documentos de Proyectos 329, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    5. Anderson, Kym, 2004. "Setting the Trade Policy Agenda: What Roles for Economists?," Working Papers 14574, International Agricultural Trade Research Consortium.
    6. Kawasaki, Kenichi, 2015. "The relative significance of EPAs in Asia-Pacific," Journal of Asian Economics, Elsevier, vol. 39(C), pages 19-30.
    7. Cai, Songfeng & Zhang, Yaxiong & Meng, Bo, 2015. "Spillover effects of TTIP on BRICS economies : a dynamic GVC-based CGE model," IDE Discussion Papers 485, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    8. Chunding Li & John Whalley, 2016. "The 2008 Financial Crisis and the Lack of Retaliatory Trade Intervention," NBER Working Papers 21853, National Bureau of Economic Research, Inc.
    9. Nakgyoon Choi, 2010. "General Equilibrium Analysis of DDA Trade Liberalization : Assessment of Alternative Scenarios," Trade Working Papers 23109, East Asian Bureau of Economic Research.
    10. H.G. Jensen & R. Sandrey & N. Vink, 2012. "The welfare impact of a Free Trade Agreement: 'Cape to Cairo'," Agrekon, Taylor & Francis Journals, vol. 51(4), pages 1-18, December.
    11. ABE Kazutomo, 2007. "Assessing the Economic Impacts of Free Trade Agreements: A Computable Equilibrium Model Approach," Discussion papers 07053, Research Institute of Economy, Trade and Industry (RIETI).
    12. Kikuchi, Tomoo & Yanagida, Kensuke & Vo, Huong, 2018. "The effects of Mega-Regional Trade Agreements on Vietnam," Journal of Asian Economics, Elsevier, vol. 55(C), pages 4-19.
    13. J. Francois & H. van Meijl & F. van Tongeren, 2003. "Trade Liberalization and Developing Countries under the Doha Round," Tinbergen Institute Discussion Papers 03-060/2, Tinbergen Institute, revised 30 Aug 2003.
    14. Álvarez-Martínez, María Teresa & Polo, Clemente, 2012. "A general equilibrium assessment of external and domestic shocks in Spain," Economic Modelling, Elsevier, vol. 29(6), pages 2486-2493.
    15. Kym Anderson, 2016. "Agricultural Trade, Policy Reforms, and Global Food Security," Palgrave Studies in Agricultural Economics and Food Policy, Palgrave Macmillan, number 978-1-137-46925-0, September.
    16. ARMAN MAZHIKEYEV & Huw Edwards, 2015. "Consequences Of Asymmetric Deeper Eurasian Economic Integration," EcoMod2015 8365, EcoMod.
    17. Jong Eun Lee, 2004. "The sequential issue in free trade areas: Policy implication for Korea," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 9(2), pages 165-174.
    18. Joseph F. Francois & Olga Pindyuk & Julia Woerz, 2008. "Trade Effects of Services Trade Liberalization in the EU," FIW Research Reports series I-004, FIW.
    19. Tom Achterbosch & Hakim Ben Hammouda & Patrick Osakwe & Frank van Tongeren, 2004. "Trade liberalisation under the Doha Development Agenda Options and consequences for Africa," International Trade 0407013, University Library of Munich, Germany.
    20. Jan Hagemejer, 2015. "Liberalization of trade flows under TTIP from a small country perspective. The case of Poland," Working Papers 2015-17, Faculty of Economic Sciences, University of Warsaw.
    21. Wainio, John & Gehlhar, Mark J. & Dyck, John H., 2011. "Selected Trade Agreements and Implications for U.S. Agriculture," Economic Research Report 102754, United States Department of Agriculture, Economic Research Service.

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