Internal Quota-Allocation Schemes and the Costs of the Mfa*

This paper suggests that schemes used within developing countries to allocate textile export quota among domestic producers typically have more severe negative effects on developing-country economic performance than the MFA export quotas themselves. We summarize allocation schemes in 16 countries, highlighting common “lock-in” and “rent-dissipation” effects of such schemes. We then use a global general-equilibrium model to evaluate the effects of MFA removal with and without these additional effects. Results indicate that estimates of gains to developing countries from an MFA removal increase sharply when internal quota-allocation schemes are taken into account.     

Goods market responses to trade shocks and trade and wages decompositions

Abstract.  Trade and wages literature asks whether trade or technology has been the major factor behind increases in wage inequality in OECD countries since the 1980s. In this literature, little attention has been paid to how goods market responses to trade shocks affect conclusions. Using an Armington heterogeneous goods trade model we capture demand side effects, and show how trade shocks affecting the price of unskilled‐intensive importable goods can be absorbed on the demand side of goods markets, with little or no impact on relative wage rates. No wage impact occurs if the elasticity of substitution in preferences between imports and import substitutes is one. As this elasticity increases, trade plays an ever larger role in explaining wage inequality changes, and as the elasticity goes below one the sign of the effect changes. We present some results of general equilibrium decompositions of total wage change into trade and technology components using UK data. We suggest that since many import demand elasticity estimates are in the neighbourhood of one, there is a prima facie case that goods market considerations further lower the significance of trade as an explanation of recent trends in OECD wage inequality beyond that claimed in the literature.     

Non-tradable goods and the border effect puzzle

The surprisingly high Canada–U.S. border effect estimated by McCallum has been puzzling trade economists in the last ten years. We argue in this paper that conventional estimates of the border effect without consideration of non-tradable goods can overstate the trade reducing effect of the national border and the impacts can be considerable. We then explore the Canada–U.S. case with a numerical general equilibrium model with parameters calibrated to 2001 data. Our counterfactual experiment results suggest that after adjusting for effects of non-tradable goods the Canada–U.S. border effect is reduced to 2.11.     

Tax Structure and Revenue Instability Under External Shocks: Some General Equilibrium Calculations for Côte D'Ivoire

This paper presents some general equilibrium calculations for Côte d'Ivoire which explore the significance of tax structure for the relationship between external shocks and revenue instability, an issue until recently little explored in the literature, either for Côte d'Ivoire or other developing countries. Results suggest that a low-rate broadly based value-added tax, as advocated by the World Bank in its structural adjustment lending, may be a poor revenue stabilizer compared with existing trade-based tax regimes in many lower-income commodity exporting countries. With high trade taxes, the external sector is smaller, and external sector shocks generate less revenue instability under existing arrangements compared with a broadly based yield-neutral alternative, such as a VAT.     

Some general equilibrium analysis applied to fiscal harmonization in the European community

This paper applies numerical general equilibrium analysis to consideration of domestic welfare impacts of some alternative schemes of fiscal harmonization in the E.E.C. A ‘coefficient of resource saving’ showing the maximum percentage resource shrinkage or minimum resource expansion consistent with a current welfare level is computed for each of 5 E.E.C. member states under a number of alternative tax replacements.     

General equilibrium with price intervention policies: a computational approach

Three alternative formulations of general equilibrium under price intervention policies are presented in a computational framework. In the first, minimum or ceiling prices are supported by a government marketing agency. Revenues are recycled to consumers in the minimum price case, and losses covered by lump sum taxes in the ceiling case. Similarities to general equilibrium with taxes are stressed. In the second, sector specific minimum prices are considered similar to Harris-Todaro equilibria. In the third, government price supports operate through market interventions. Existence is discussed, numerical examples presented, and possible policy applications outlined.     

Gains and losses from potential bilateral US–China trade retaliation

Two closely related numerical general equilibrium models of world trade are used to analyze the potential consequences of US–China bilateral retaliation on trade flows and welfare. One is a conventional Armington trade model with five regions, the US, China, EU, Japan and the Rest of the World, and calibrated to a global 2009 micro consistent data set. The other is a modified version of this model with monetary non-neutrals and including China's trade surplus as an endogenous variable.Who may gain or loss from global trade conflicts spawned by adjustment pressures in the post crisis world is much debated. In a US–China trade conflict, Europe and Japan would seem gainers from preferential access to US and Chinese markets. The loss of markets would hurt the US, but moving closer to an optimal tariff could be the source of terms of trade gains. And the ease of substitution across trading partners' practices would determine costs for China.Results from the conventional model suggest that retaliation between the two countries can be welfare improving for the US as it substitutes expenditures into own goods and improve its terms of trade with non-retaliatory regions, while China and non-retaliatory regions may be adversely affected. Results in the endogenous trade surplus model from the central case model specification, however, suggest that both the US and the EU (the deficit regions) have welfare losses in most cases, while the surplus region, China, and the ROW have welfare gains. In both models, when the bilateral tariff rates are very high, gains accrue to the EU and Japan from trade diversion if the substitutions elasticities of imports are high. Costs are borne by the US and China in lost exports, lowered terms of trade and adjustment costs at home.