THE CONTRIBUTION OF PRODUCTIVITY LINKAGES TO THE GENERAL EQUILIBRIUM ANALYSIS OF FREE TRADE AGREEMENTS

Applied general equilibrium (AGE) analysis is often found to under-predict the increases in trade and economic growth that result from trade liberalization. One potential reason is that conventional AGE models ignore the strong correlations that exist between firm productivity, on the one hand, and exporting, importing, and investment, on the other. To examine this possibility, this study incorporates econometric evidence of these linkages into the dynamic Global Trade Analysis Project AGE model, and then uses this model to analyze a recently proposed East Asian free trade agreement. While conventional AGE modeling effects are found to predominate and be reinforced by the productivity effects, in some cases the latter actually reverse the changes predicted by the conventional effects.


Issue Date:
2003
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/28693
Total Pages:
29
Series Statement:
GTAP Working Paper No. 23




 Record created 2017-04-01, last modified 2017-08-24

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