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Welfare Effects of Trade Liberalisation in Distorted Economies A Dynamic General Equilibrium Assessment for Norway

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A disaggregated intertemporal CGE model is used to simulate the welfare effects in Norway of the recently implemented trade reforms including the WTO agreement, the EEA treaty, the EFTA fishery agreement and an anticipated EEA resolution on shipbuilding. These reforms affect the Norwegian economy through changes in tariffs, Non Tariff Barriers (NTBs), government procurement and subsidy policy as well as shifts in world prices and demand. Reduction of such import barriers that represent real costs for the country is identified as the most important source of welfare gains, through improved terms of trade. Due to initial distortions caused by taxes and imperfect competition, changes in the resource allocation have first order effects on welfare. In particular, this explains why the simulated reduction of employment has a significant negative impact on the total welfare gain.

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  • Taran Fæhn & Erling Holmøy, 1999. "Welfare Effects of Trade Liberalisation in Distorted Economies A Dynamic General Equilibrium Assessment for Norway," Discussion Papers 251, Statistics Norway, Research Department.
    • Handle: RePEc:ssb:dispap:251
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    Cited by:

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    2. Turid Avitsland & Jorgen Aasness, 2006. "Combining microsimulation and CGE models: Effects on equality of VAT reforms," Computing in Economics and Finance 2006 132, Society for Computational Economics.

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    More about this item

    Keywords

    Trade Reforms; Intertemporal CGE Model; Welfare;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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