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Opening a Pandora's box: Modeling world trade patterns at the 2035 horizon

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  • Fontagné, Lionel
  • Fouré, Jean

Abstract

Economic projections for the world economy, particularly in relation to the construction of Computable General Equilibrium (CGE) baselines, are generally rather conservative and take scant account of the wide range of possible evolutions authorized by the underlying economic mechanisms considered. Against this background, we adopt an open mind to the projection of world trade trajectories. Taking a 2035 horizon, we examine how world trade patterns will be shaped by the changing comparative advantages, demand, and capabilities of different regions. We combine a convergence model fitting three production factors (capital, labor and energy) and two factor-specific productivities, alongside a dynamic CGE model of the world economy calibrated to reproduce observed elasticity of trade to income. Each scenario involves three steps. First, we project growth at country level based on factor accumulation, educational attainment and efficiency gains, and discuss uncertainties related to our main drivers. Second, we impose this framework (demographics, gross domestic product, saving rates, factors and current account trajectories) on the CGE baseline. Third, we implement trade policy scenarios (tariffs as well as non-tariff measures in goods and services), in order to get factor allocation across sectors from the model as well as demand and trade patterns. We show that the impact of changing baselines is greater than the impact of a policy shock on the order of magnitude of changes in world trade patterns, which points to the need for care when designing CGE baselines.

Suggested Citation

  • Fontagné, Lionel & Fouré, Jean, 2013. "Opening a Pandora's box: Modeling world trade patterns at the 2035 horizon," WTO Staff Working Papers ERSD-2013-09, World Trade Organization (WTO), Economic Research and Statistics Division.
    • Handle: RePEc:zbw:wtowps:ersd201309
    DOI: 10.30875/2d0d32b4-en
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    Cited by:

    1. Lionel Fontagné & Jean Fouré & Alexander Keck, 2017. "Simulating World Trade in the Decades Ahead: Driving Forces and Policy Implications," The World Economy, Wiley Blackwell, vol. 40(1), pages 36-55, January.
    2. Tomasz Serwach, 2013. "Renminbi jako waluta miedzynarodowa - stan obecny oraz ocena perspektyw / Renminbi as international currency - current state and potential perspectives," International Economics, University of Lodz, Faculty of Economics and Sociology, issue 4, pages 39-53, December.
    3. Gros, Daniel & Alcidi, Cinzia, 2014. "The Global Economy in 2030: Trends and Strategies for Europe," CEPS Papers 9142, Centre for European Policy Studies.
    4. Jean Chateau & Lionel Fontagné & Jean Fouré & Åsa Johansson & Eduardo Olaberría, 2015. "Trade patterns in the 2060 world economy," OECD Journal: Economic Studies, OECD Publishing, vol. 2015(1), pages 67-100.
    5. Åsa Johansson & Eduardo Olaberría, 2014. "Global Trade and Specialisation Patterns Over the Next 50 Years," OECD Economic Policy Papers 10, OECD Publishing.
    6. Elena Spasova & Eduard Marinov, 2021. "Global value chains and the changing nature of international specialization," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 3-28,29-52.
    7. Åsa Johansson & Eduardo Olaberría, 2014. "Long-term Patterns of Trade and Specialisation," OECD Economics Department Working Papers 1136, OECD Publishing.

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    More about this item

    Keywords

    Growth; Macroeconomic Projections; Dynamic Baselines;
    All these keywords.

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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