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The Welfare Analysis of a Free Trade Zone: Intermediate Goods and the Asian Tigers

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  • Andrew Feltenstein
  • Florenz Plassmann

Abstract

We analyse trade reform among the ASEAN countries, which recently began removing all mutual trade barriers. The standard method to avoid complete specialisation in traded goods is to distinguish goods both by physical type and place of origin (the so‐called Armington assumption). This methodology is not suitable for the sort of intermediate goods produced by the ASEAN countries. We develop a computational approach in the context of a non‐Armington dynamic general equilibrium model. Analysing the results of a calibrated version of the model, we find that trade liberalisation is generally welfare improving for the ASEAN countries.

Suggested Citation

  • Andrew Feltenstein & Florenz Plassmann, 2008. "The Welfare Analysis of a Free Trade Zone: Intermediate Goods and the Asian Tigers," The World Economy, Wiley Blackwell, vol. 31(7), pages 905-924, July.
    • Handle: RePEc:bla:worlde:v:31:y:2008:i:7:p:905-924
    DOI: 10.1111/j.1467-9701.2008.01108.x
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    References listed on IDEAS

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    1. Jaime de Melo, 2015. "Computable General Equilibrium Models for Trade Policy Analysis in Developing Countries: A Survey," World Scientific Book Chapters, in: Modeling Developing Countries' Policies in General Equilibrium, chapter 8, pages 141-175, World Scientific Publishing Co. Pte. Ltd..
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    5. Plassmann, Florenz, 2005. "The advantage of avoiding the Armington assumption in multi-region models," Regional Science and Urban Economics, Elsevier, vol. 35(6), pages 777-794, November.
    6. repec:bla:ecorec:v:73:y:1997:i:223:p:305-13 is not listed on IDEAS
    7. Morgan, William & Mutti, John & Rickman, Dan, 1996. "Tax Exporting, Regional Economic Growth, and Welfare," Journal of Urban Economics, Elsevier, vol. 39(2), pages 131-159, March.
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    Cited by:

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    2. Mr. Ichiro Tokutsu & Mika Saito, 2006. "The Impact of Tradeon Wages: What If Countries Are Not Small?," IMF Working Papers 2006/155, International Monetary Fund.
    3. Plassmann, Florenz & Feltenstein, Andrew, 2016. "How large do multi-region models need to be?," Journal of Policy Modeling, Elsevier, vol. 38(1), pages 138-155.
    4. Jeffrey Condon & Andrew Feltenstein & Florenz Plassman & Mark Rider & David L. Sjoquist, 2014. "A Regional Model of Growth Oriented Fiscal Policy: An Application to Georgia and Its Competitor States," The Review of Regional Studies, Southern Regional Science Association, vol. 44(2), pages 177-209, Summer.
    5. Chen, Jihong & Wan, Zheng & Zhang, Fangwei & Park, Nam-kyu & Zheng, Aibing & Zhao, Jun, 2018. "Evaluation and comparison of the development performances of typical free trade port zones in China," Transportation Research Part A: Policy and Practice, Elsevier, vol. 118(C), pages 506-526.

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