IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/11347.html

International Trade Policy and Quantitative Models : A Practitioner’s Guide

Author

Listed:
  • Artuc, Erhan
  • Ortega Hernandez, Johan Andrey

Abstract

Quantitative international trade models are essential tools for policy analysis. This paper provides guidance for quantifying and solving trade models for policy simulations using the popular programming languages Python, Julia, Matlab, and R. The solution follows simple linear steps and can easily be modified to add different components; thus, it can be extended to a wide class of models. Using the tools provided, the paper shows that an additional 25 percent ad valorem tariff between high-income and non-high-income countries has a substantial negative effect on real disposable income in all countries, ranging between 0.5 and 7.4 percent. The magnitude of the impact is highly heterogeneous for both income groups, but significantly larger on average for the non-high-income countries.

Suggested Citation

  • Artuc, Erhan & Ortega Hernandez, Johan Andrey, 2026. "International Trade Policy and Quantitative Models : A Practitioner’s Guide," Policy Research Working Paper Series 11347, The World Bank.
    • Handle: RePEc:wbk:wbrwps:11347
    as

    Download full text from publisher

    File URL: https://documents.worldbank.org/curated/en/099455303302627347/pdf/IDU-89d9b7f3-8392-43df-8aaf-9aa352301347.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    2. Simonovska, Ina & Waugh, Michael E., 2014. "The elasticity of trade: Estimates and evidence," Journal of International Economics, Elsevier, vol. 92(1), pages 34-50.
    3. Artuç, Erhan & McLaren, John, 2015. "Trade policy and wage inequality: A structural analysis with occupational and sectoral mobility," Journal of International Economics, Elsevier, vol. 97(2), pages 278-294.
    4. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
    5. Hiau Looi Kee & Alessandro Nicita & Marcelo Olarreaga, 2008. "Import Demand Elasticities and Trade Distortions," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 666-682, November.
    6. Lorenzo Caliendo & Maximiliano Dvorkin & Fernando Parro, 2019. "Trade and Labor Market Dynamics: General Equilibrium Analysis of the China Trade Shock," Econometrica, Econometric Society, vol. 87(3), pages 741-835, May.
    7. Costas Arkolakis & Arnaud Costinot & Andres Rodriguez-Clare, 2012. "New Trade Models, Same Old Gains?," American Economic Review, American Economic Association, vol. 102(1), pages 94-130, February.
    8. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, vol. 67(5), pages 823-839, December.
    9. Kyle Bagwell & Robert W. Staiger & Ali Yurukoglu, 2021. "Quantitative Analysis of Multiparty Tariff Negotiations," Econometrica, Econometric Society, vol. 89(4), pages 1595-1631, July.
    10. Redding, Stephen J., 2016. "Goods trade, factor mobility and welfare," Journal of International Economics, Elsevier, vol. 101(C), pages 148-167.
    11. Erhan Artuç & Shubham Chaudhuri & John McLaren, 2010. "Trade Shocks and Labor Adjustment: A Structural Empirical Approach," American Economic Review, American Economic Association, vol. 100(3), pages 1008-1045, June.
    12. David Lagakos & Michael E. Waugh, 2013. "Selection, Agriculture, and Cross-Country Productivity Differences," American Economic Review, American Economic Association, vol. 103(2), pages 948-980, April.
    13. Lee, Eunhee, 2020. "Trade, inequality, and the endogenous sorting ofheterogeneous workers," Journal of International Economics, Elsevier, vol. 125(C).
    14. Erhan Artuc & Irene Brambilla & Guido Porto, 2022. "Patterns of Labour Market Adjustment to Trade Shocks with Imperfect Capital Mobility," The Economic Journal, Royal Economic Society, vol. 132(646), pages 2048-2074.
    15. Robert Dekle & Jonathan Eaton & Samuel Kortum, 2008. "Global Rebalancing with Gravity: Measuring the Burden of Adjustment," IMF Staff Papers, Palgrave Macmillan, vol. 55(3), pages 511-540, July.
    16. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    17. Lorenzo Caliendo & Fernando Parro, 2015. "Estimates of the Trade and Welfare Effects of NAFTA," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 82(1), pages 1-44.
    18. Christoph E. Boehm & Andrei A. Levchenko & Nitya Pandalai-Nayar, 2023. "The Long and Short (Run) of Trade Elasticities," American Economic Review, American Economic Association, vol. 113(4), pages 861-905, April.
    19. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
    20. Artuc, Erhan & Bastos, Paulo & Lee, Eunhee, 2025. "Trade, jobs, and worker welfare," Journal of International Economics, Elsevier, vol. 158(C).
    21. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-116, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Costinot, Arnaud & Rodríguez-Clare, Andrés, 2014. "Trade Theory with Numbers: Quantifying the Consequences of Globalization," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 197-261, Elsevier.
    2. Galle, Simon & Lorentzen, Linnea, 2024. "The unequal effects of trade and automation across local labor markets," Journal of International Economics, Elsevier, vol. 150(C).
    3. Pao-Li Chang & Yi-Fan Chen & Wen-Tai Hsu, 2022. "Labor Market Participation, Income Distribution, and Welfare Gains from Trade," Economics and Statistics Working Papers 6-2022, Singapore Management University, School of Economics.
    4. Yoto V. Yotov, 2024. "The evolution of structural gravity: The workhorse model of trade," Contemporary Economic Policy, Western Economic Association International, vol. 42(4), pages 578-603, October.
    5. Scott L. Baier & Amanda Kerr & Yoto V. Yotov, 2018. "Gravity, distance, and international trade," Chapters, in: Bruce A. Blonigen & Wesley W. Wilson (ed.), Handbook of International Trade and Transportation, chapter 2, pages 15-78, Edward Elgar Publishing.
    6. Head, Keith & Mayer, Thierry, 2014. "Gravity Equations: Workhorse,Toolkit, and Cookbook," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 131-195, Elsevier.
    7. Neary, Peter & Carrère, Céline & Mrázová, Monika, 2020. "Gravity without Apologies: The Science of Elasticities, Distance, and Trade," CEPR Discussion Papers 14473, Centre for Economic Policy Research.
    8. Qian, Zeyi & Suzuki, Kensuke & Zhang, Junfu, 2026. "Trade Costs, Entry Costs, and Regional Economic Growth in China," IZA Discussion Papers 18507, IZA Network @ LISER.
    9. Nelson Lind & Natalia Ramondo, 2023. "Trade with Correlation," American Economic Review, American Economic Association, vol. 113(2), pages 317-353, February.
    10. Mario Larch & Yoto V. Yotov, 2016. "General Equilibrium Trade Policy Analysis with Structural Gravity," CESifo Working Paper Series 6020, CESifo.
    11. Rodrigo Adão & Costas Arkolakis & Federico Esposito, 2019. "General Equilibrium Effects in Space: Theory and Measurement," NBER Working Papers 25544, National Bureau of Economic Research, Inc.
    12. Lee, Eunhee, 2020. "Trade, inequality, and the endogenous sorting ofheterogeneous workers," Journal of International Economics, Elsevier, vol. 125(C).
    13. Fan, Haichao & Gao, Xiang & Zhang, Lina, 2021. "How China's accession to the WTO affects global welfare?," China Economic Review, Elsevier, vol. 69(C).
    14. Céline Carrère & Monika Mrázová & J Peter Neary, 2020. "Gravity Without Apology: the Science of Elasticities, Distance and Trade," The Economic Journal, Royal Economic Society, vol. 130(628), pages 880-910.
    15. Pol Antràs & Davin Chor, 2021. "Global Value Chains," NBER Working Papers 28549, National Bureau of Economic Research, Inc.
    16. Treb Allen & Costas Arkolakis & Yuta Takahashi, 2020. "Universal Gravity," Journal of Political Economy, University of Chicago Press, vol. 128(2), pages 393-433.
    17. French, Scott, 2016. "The composition of trade flows and the aggregate effects of trade barriers," Journal of International Economics, Elsevier, vol. 98(C), pages 114-137.
    18. Michael Waugh & Ina Simonovska, 2012. "Different Trade Models, Different Trade Elasticities?," 2012 Meeting Papers 618, Society for Economic Dynamics.
    19. Fally, Thibault & Sayre, James E., 2018. "Commodity Trade Matters," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt9121v3rt, Department of Agricultural & Resource Economics, UC Berkeley.
    20. Xu, Yang & Yang, Xi, 2021. "Access to ports and the welfare gains from domestic transportation infrastructure," Journal of Urban Economics, Elsevier, vol. 126(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:11347. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Roula I. Yazigi (email available below). General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.