CONSISTENT TRADE POLICY AGGREGATION* |
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| Authors: | James E. Anderson |
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| Affiliation: | 1. Boston College and NBER, U.S.A.;2. I am grateful to Will Martin for suggesting the topic of this article to me and for helpful comments. I thank G. Chris Rodrigo for assistance with preparing the data and for helpful comments. I am also grateful to the World Bank for research support. Please address correspondence to: James E. Anderson, Department of Economics, Boston College, 140 Commonwealth Avenue, Chestnut Hill, MA 02467. Phone: 617 552‐3691. Fax: 617 552‐2308. E‐mail: . |
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| Abstract: | Most empirical policy work requires policy aggregation. Trade policy aggregation exemplifies the aggregation problem poignantly, with thousands of highly dispersed trade barriers. This article provides methods of policy aggregation that are consistent with two common objectives of empirical work. One is to preserve real income. The other is to preserve the real volume of activity in the parts of the economy being aggregated. Both objectives must be achieved for consistent multicountry policy modeling. An application to India shows that the standard atheoretic method of aggregation overstates India's real income by around three times the global gains from free trade. |
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