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Trade liberalization gains under different trade theories: A case study for Ukraine

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  • Zoryana Olekseyuk

    (University of Duisburg-Essen)

  • Edward J. Balistreri

    (Division of Economics and Business, Colorado School of Mines)

Abstract

To analyze the Deep and Comprehensive Free Trade Area (DCFTA) between Ukraine and the EU we develop a multi-region general-equilibrium simulation model calibrated to GTAP 8.1 data. We implement three alternative trade structures for services and manufactured goods: a.) a standard specification of perfect competition based on the Armington [1969] assumption of regionally differentiated goods; b.) monopolistic competition among symmetric firms consistent with Krugman [1980]; and c.) a competitive selection model of heterogeneous firms consistent with Melitz [2003]. Across these structures the DCFTA indicates relatively large gains for Ukraine (and small gains for the EU). A novel result emerges, however, in that the gains for Ukraine are largest under an assumed Armington structure. This is attributed to a movement of resources into Ukraine's traditional export sectors which produce under constant returns. While there is little danger of deindustrialization dominating the overall welfare gains, we do observe substantially lower gains due to monopolistic competition.

Suggested Citation

  • Zoryana Olekseyuk & Edward J. Balistreri, 2014. "Trade liberalization gains under different trade theories: A case study for Ukraine," Working Papers 2014-13, Colorado School of Mines, Division of Economics and Business.
  • Handle: RePEc:mns:wpaper:wp201413
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    File URL: http://econbus-papers.mines.edu/working-papers/wp201413.pdf
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    Cited by:

    1. Zoryana Olekseyuk, 2015. "The EU-Ukraine Deep and Comprehensive Free Trade Agreement and the importance of FDI," EcoMod2015 8391, EcoMod.
    2. Zoryana Olekseyuk, 2016. "Modeling of FDI in business services: Additional effects in case of Ukraine's European integration," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(7), pages 1010-1043, October.

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    More about this item

    Keywords

    DCFTA; Ukraine; EU; Armington; New trade theory; Krugman; Melitz;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models

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