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Introducing Imperfect Competition into the SALTER Model

Salter Working Paper Number 25

Introducing Imperfect Competition into the SALTER Model by Thomas W. Hertel, is Working Paper number 25 in the development of The SALTER Model of the World Economy.

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Introduction and Motivation

Adjustments to the Data Base
Intraregional Trade
International Transport Services
Zero Profits
Global Savings = Investment

Derivation of Behavioral Equations for the Imperfectly Competitive Sectors
Pricing Decisions
Demand Structure
Perceived Demand Elasticities

Behavioral Equations in the Perfectly Competitive Sectors

Calibration of Imperfectly Competitive Sectors
The Basic Problem
Some Solutions

Unilateral Trade Liberalization in the Australasian Region
Sectoral Support in Initial Equilibrium
Changes is Industry Output
Welfare Effect of Unilateral Trade Liberalization

Multilateral Trade Liberalization
Output Changes Under Perfect Competition
Imperfect Competition
Unilateral and Multilateral Liberalization Compared
Welfare Effects of Multilateral Liberalization

Summary and Implications for the SALTER Project


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