China's Potential Future Growth and Gains from Trade Policy Bargaining: Some Numerical Simulation Results
Numerical simulation analysis of bargaining solutions is little developed in existing literature. Here we use a multi country, single period numerical general equilibrium model which captures China and her major trading partners and examine the outcomes of trade policy bargaining solutions (bargaining over tariffs and financial transfers) over time as China grows more rapidly than her trade partners. We compute gains relative to non-cooperative Nash equilibria for a range of model parameterizations. This yields a measure of both absolute and relative gain to China from bargaining. We calibrate our model to base case data for 2008 and use a model formulation where there are heterogeneous goods across countries. The gains from trade bargaining accrue more heavily to other countries when we use 2008 data rather than later year data. We then consider the impacts out into the future of different country growth rates which sharply increases China's relative size. Our objective is to assess how China's gains from bargaining change over time; whether they grow at a faster rate than GDP growth and for which parameterizations. Our simulation results indicate that China's welfare gain from trade bargaining will increase over time if countries keep their present GDP growth rates for several decades, but there are major difference when using different bargaining solution concepts. These differences have not been noted in existing literature but have an intuitive explanation. Our results also indicate that if China jointly bargains along with India, Brazil and other developing countries with the OECD, China's gain will further increase. Bargaining gains are also sensitive to country size. When we use PPP to adjust China's relative GDP size; China's trade bargaining welfare gain increases by about 37%.
|Date of creation:||Feb 2012|
|Date of revision:|
|Publication status:||published as Li, Chunding & Whalley, John, 2014. "China's potential future growth and gains from trade policy bargaining: Some numerical simulation results," Economic Modelling, Elsevier, vol. 37(C), pages 65-78.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
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.:
- Kalai, Ehud & Smorodinsky, Meir, 1975. "Other Solutions to Nash's Bargaining Problem," Econometrica, Econometric Society, vol. 43(3), pages 513-18, May.
- Thomson, William, 1994.
"Cooperative models of bargaining,"
Handbook of Game Theory with Economic Applications,
in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 2, chapter 35, pages 1237-1284
- Pierre Cahuc & Fabien Postel-Vinay & Jean-Marc Robin, 2006.
"Wage Bargaining with On-the-Job Search: Theory and Evidence,"
Econometric Society, vol. 74(2), pages 323-364, 03.
- Pierre Cahuc & Fabien Postel-Vinay & Jean-Marc Robin, 2003. "Wage bargaining with on-the-job search : theory and evidence," Research Unit Working Papers 0212, Laboratoire d'Economie Appliquee, INRA.
- Cahuc, Pierre & Postel-Vinay, Fabien & Robin, Jean-Marc, 2003. "Wage Bargaining with On-The-Job Search: Theory and Evidence," CEPR Discussion Papers 4154, C.E.P.R. Discussion Papers.
- Pierre Cahuc & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "Wage bargaining with on-the-job search: Theory and evidence," Post-Print halshs-00754171, HAL.
- Pierre Cahuc & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "Wage Bargaining with On-the-Job Search: Theory and Evidence," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00176090, HAL.
- Pierre Cahuc & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "Wage bargaining with on-the-job search: theory and evidence," Sciences Po publications info:hdl:2441/dc0ckec3fcb, Sciences Po.
- Alvin E. Roth & V. Prasnikar & M. Okuno-Fujiwara & S. Zamir, 1998.
"Bargaining and market behavior in Jerusalem, Liubljana, Pittsburgh and Tokyo: an experimental study,"
Levine's Working Paper Archive
344, David K. Levine.
- Roth, Alvin E. & Vesna Prasnikar & Masahiro Okuno-Fujiwara & Shmuel Zamir, 1991. "Bargaining and Market Behavior in Jerusalem, Ljubljana, Pittsburgh, and Tokyo: An Experimental Study," American Economic Review, American Economic Association, vol. 81(5), pages 1068-95, December.
- Raphael Trifon & Moshe Landau, 1974. "A Model of Wage Bargaining Involving Negotiations and Sanctions," Management Science, INFORMS, vol. 20(6), pages 960-970, February.
- Shoven,John B. & Whalley,John, 1992.
"Applying General Equilibrium,"
Cambridge University Press, number 9780521266550, 1.
- Trejos, Alberto & Wright, Randall, 1995. "Search, Bargaining, Money, and Prices," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 118-41, February.
- John Kennan, 2010.
"Private Information, Wage Bargaining and Employment Fluctuations,"
Review of Economic Studies,
Oxford University Press, vol. 77(2), pages 633-664.
- John Kennan, 2006. "Private Information, Wage Bargaining and Employment Fluctuations," NBER Working Papers 11967, National Bureau of Economic Research, Inc.
- John Kennan, 2005. "Private Information, Wage Bargaining and Employment Fluctuations," 2005 Meeting Papers 555, Society for Economic Dynamics.
- Abrego, Lisandro, et al, 2001. "Trade and Environment: Bargaining Outcomes from Linked Negotiations," Review of International Economics, Wiley Blackwell, vol. 9(3), pages 414-28, August.
- Ariel Rubinstein, 2010.
"Perfect Equilibrium in a Bargaining Model,"
Levine's Working Paper Archive
661465000000000387, David K. Levine.
- Yan Dong & John Whalley, 2009.
"Model Structure and the Combined Welfare and Trade Effects of China's Trade Related Policies,"
NBER Working Papers
15363, National Bureau of Economic Research, Inc.
- Dong Yan & Whalley John, 2011. "Model Structure and the Combined Welfare and Trade Effects of China's Trade Related Policies," Global Economy Journal, De Gruyter, vol. 10(4), pages 1-21, January.
- Thomson, William, 1983. "Problems of fair division and the Egalitarian solution," Journal of Economic Theory, Elsevier, vol. 31(2), pages 211-226, December.
- Harry G. Johnson, 1965. "An Economic Theory of Protectionism, Tariff Bargaining, and the Formation of Customs Unions," Journal of Political Economy, University of Chicago Press, vol. 73, pages 256.
- Johnson, Eric J. & Camerer, Colin & Sen, Sankar & Rymon, Talia, 2002. "Detecting Failures of Backward Induction: Monitoring Information Search in Sequential Bargaining," Journal of Economic Theory, Elsevier, vol. 104(1), pages 16-47, May.
- Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
- repec:oup:restud:v:65:y:1998:i:2:p:235-60 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:17826. 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: ()
If references are entirely missing, you can add them using this form.