Armington Elasticities and Terms of Trade Effects in Global CGE Models
Staff Working Paper
Armington Elasticities and Terms of Trade Effects in Global CGE Models by Xiao-guang Zhang was released on 8 February 2006, in conjunction with the staff working paper, The Armington Model.
Armington elasticities specify the degrees of substitution in demand between similar products produced in different countries. They are critical parameters which, along with model structure, data and other parameters, determine the results of policy experiments. Especially when many tariffs are small, trade liberalisation simulations can produce positive or negative welfare outcomes depending on the values assumed for Armington elasticities. The purpose of this paper is to illustrate the effects of the Armington assumption on one of the main factors that affects welfare outcomes, namely, the terms of trade.Also see:
CONTENTS
Preliminaries
Cover, Copyright, Contents, Preface, Acknowledgments, Key Points, Overview
1 Introduction
2 Terms of trade effects in non-Armington models
2.1 A two-country two-good non-Armington pure exchange model
2.2 Terms of trade effects of a tariff in a non-Armington model
3 Terms of trade effects in Armington trade models: one-tier substitution
3.1 One-tier Armington substitution in a two-country pure exchange model
3.2 Terms of trade effects of a tariff in a one-tier Armington model
4 Terms of trade effects in Armington trade models: two-tier substitution
4.1 Two-tier Armington substitution in a three-country pure exchange model
4.2 Terms of trade effects of a uniform tariff in a two-tier Armington model
4.3 Terms of trade effects of a discriminatory tariff in a two-tier Armington model
5 Extensions of the simple Armington model
5.1 Many goods pure exchange models
5.2 Incorporating production with primary factors
5.3 Production with primary factors and intermediate inputs
6 Applied CGE models with Armington assumptions: the case of GTAP
7 Concluding comments
References
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