Disaggregating the United States GTAP region into 51 US-state subregions

The opening of the NorthWestern Route (NWR) that crosses the Canadian Arctic or the expansion of the Panama Canal will reduce the trade costs faced by the United States (US) economy. However, these trade cost reductions will be asymmetric between different US subregions, in particular between the East and West Coasts of the US. For instance, both the NWR and the Panama Canal expansion will diminish the trade costs between Asia and the South and East coasts of the United States, while the trade costs between Asia and the West Coast will not be affected. On the other hand, the trade costs between Europe and the West Coast will change, while those between Europe and the East Coast will not. To properly analyze the impact of these asymmetric trade cost changes in a global economic modeling framework, the US must be disaggregated into subregions. Accordingly, the objective of this research is to assess the difference between trade cost reductions employed in a model where the US is included as one region and in a framework that disaggregates the US into key port regions to illustrate the importance of regional disaggregation in some cases. To accomplish this, we first carefully document the disaggregation of the US into state level regions in the GTAP database followed by two relevant policy experiments that highlight the impact of disaggregation on simulation results including the opening of the Arctic shipping lanes and a hypothetical drought scenario in the Southwest region of the United States. Results highlight the importance of further disaggregation of the US in both experiments.