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Potential productivity effects of U.S. trade agreements

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  • Tsigas, Marinos

Abstract

This work analyzes the productivity effects of US trade agreements implemented during 1984-2016. After reviewing the literature of the effects of trade on productivity, we discuss the mechanisms that may come into play when there are trade changes. In a general view of the potential effects of trade on productivity, trade may result in increased productivity because firms take actions to cope with competition (Aghion et al., 2004). In Melitz (2003), strong competition and selection caused by trade liberalization result in less productive firms exiting the market and a reallocation of market shares to more productive firms. Trade agreements directly affect tariffs and nontariff measures (NTMs). We rely on published estimates of the direct effects of US trade agreements on tariffs and NTMs. The U.S. International Trade Commission (2016) estimated the total tariff equivalents of the barriers to trade that were removed by U.S. trade agreements. The USITC econometric analysis was based on the Baier and Bergstrand (2007) gravity model of trade. This analysis is based on the GTAP and GTAP-HET frameworks. Simulations with the GTAP model (Hertel, 1997, and Corong et al., 2017) provide an analysis of U.S. trade agreements which abstracts from productivity effects. The GTAP analysis will provide a reference point to which the GTAP-HET analysis will be compared. The GTAP-HET framework (Akgul et al., 2016) introduces the firm heterogeneity theory of Melitz in the GTAP model.

Suggested Citation

  • Tsigas, Marinos, 2021. "Potential productivity effects of U.S. trade agreements," Conference papers 333287, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:333287
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    References listed on IDEAS

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    1. Zeynep Akgul & Nelson B Villoria & Thomas W Hertel, 2016. "GTAP-HET: Introducing Firm Heterogeneity into the GTAP Model," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 1(1), pages 111-180, June.
    2. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    3. Philippe Aghion & Richard Blundell & Rachel Griffith & Peter Howitt & Susanne Prantl, 2004. "Entry and Productivity Growth: Evidence from Microlevel Panel Data," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 265-276, 04/05.
    4. Baier, Scott L. & Bergstrand, Jeffrey H., 2007. "Do free trade agreements actually increase members' international trade?," Journal of International Economics, Elsevier, vol. 71(1), pages 72-95, March.
    5. Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685, December.
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