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Welfare Impact of Trade Liberalization

  • Sang-Wook (Stanley) Cho

    ()

    (School of Economics, The University of New South Wales)

  • Julian P. Diaz

    ()

    (Department of Economics, Bowdoin College)

This paper constructs a static Applied General Equilibrium Model and analyzes the distributional impact of trade reforms. To calibrate our model, we work with the Household Expenditure Survey to disaggregate household groups by income, age, and skill intensity, and the Input-Output table to construct a Social Accounting Matrix. Our benchmark simulation looks at Slovenia joining the European Union. We then compare with two alternative scenarios: a free trade agreement between Slovenia and the EU, and an alternative fiscal arrangement of distributing tariff revenues under the EU. While trade reforms lead to falling prices in the import sector, rising production in the export sector, and improvement in aggregate welfare, the distributional impacts across household groups vary in its degree.

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File URL: http://wwwdocs.fce.unsw.edu.au/economics/Research/WorkingPapers/2008_20.pdf
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Paper provided by School of Economics, The University of New South Wales in its series Discussion Papers with number 2008-20.

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Length: 33 pages
Date of creation: Oct 2008
Date of revision:
Handle: RePEc:swe:wpaper:2008-20
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  1. Shoven, John B & Whalley, John, 1984. "Applied General-Equilibrium Models of Taxation and International Trade: An Introduction and Survey," Journal of Economic Literature, American Economic Association, vol. 22(3), pages 1007-51, September.
  2. Porto, Guido G., 2006. "Using survey data to assess the distributional effects of trade policy," Journal of International Economics, Elsevier, vol. 70(1), pages 140-160, September.
  3. Timothy J. Kehoe, 1996. "Social accounting matrices and applied general equilibrium models," Working Papers 563, Federal Reserve Bank of Minneapolis.
  4. Sang-Wook Stanley Cho & Julian P. Diaz, 2007. "Trade Liberalization in Latin America and Eastern Europe: The Cases of Ecuador and Slovenia," Discussion Papers 2007-25, School of Economics, The University of New South Wales.
  5. Michael Rolleigh, 2004. "Plant Heterogeneity and Applied General Equilibrium Models of Trade: Lessons from the CA-US FTA," 2004 Meeting Papers 360, Society for Economic Dynamics.
  6. Timothy Kehoe & Antonio Manresa & Clemente Polo & Ferrán Sancho, 1989. "Un análisis de equilibrio general de la reforma fiscal de 1986 en España," Investigaciones Economicas, Fundación SEPI, vol. 13(3), pages 337-385, September.
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