IDEAS home Printed from https://ideas.repec.org/p/jet/dpaper/dpaper204.html
   My bibliography  Save this paper

Trade Coefficients and the Role of Elasticity in a Spatial CGE Model Based on the Armington Assumption

Author

Listed:
  • Ando, Asao
  • Meng, Bo
  • Chao, Qu

Abstract

The Armington Assumption in the context of multi-regional CGE models is commonlyinterpreted as follows: Same commodities with different origins are imperfect substitutes for eachother. In this paper, a static spatial CGE model that is compatible with this assumption andexplicitly considers the transport sector and regional price differentials is formulated. Tradecoefficients, which are derived endogenously from the optimization behaviors of firms andhouseholds, are shown to take the form of a potential function. To investigate how the elasticityof substitutions affects equilibrium solutions, a simpler version of the model that incorporatesthree regions and two sectors (besides the transport sector) is introduced. Results indicate: (1) ifcommodities produced in different regions are perfect substitutes, regional economies will beeither autarkic or completely symmetric and (2) if they are imperfect substitutes, the impact ofelasticity on the price equilibrium system as well as trade coefficients will be nonlinear andsometimes very sensitive.

Suggested Citation

  • Ando, Asao & Meng, Bo & Chao, Qu, 2009. "Trade Coefficients and the Role of Elasticity in a Spatial CGE Model Based on the Armington Assumption," IDE Discussion Papers 204, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper204
    as

    Download full text from publisher

    File URL: https://ir.ide.go.jp/?action=repository_action_common_download&item_id=37965&item_no=1&attribute_id=22&file_no=1
    File Function: First version, 2009
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Asao Ando & Bo Meng, 2009. "The Transport Sector And Regional Price Differentials: A Spatial Cge Model For Chinese Provinces," Economic Systems Research, Taylor & Francis Journals, vol. 21(2), pages 89-113.
    2. Brander, James A., 1981. "Intra-industry trade in identical commodities," Journal of International Economics, Elsevier, vol. 11(1), pages 1-14, February.
    3. Paul A. Samuelson, 1953. "Prices of Factors and Goods in General Equilibrium," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 21(1), pages 1-20.
    4. Lofgren, Hans & Robinson, Sheman, 2002. "Spatial-network, general-equilibrium model with a stylized application," Regional Science and Urban Economics, Elsevier, vol. 32(5), pages 651-671, September.
    5. Philip McCann, 2005. "Transport costs and new economic geography," Journal of Economic Geography, Oxford University Press, vol. 5(3), pages 305-318, June.
    6. Meng, Bo & Ando, Asao, 2005. "An Economic Derivation on Trade Coefficients under the Framework of Multi-regional I-O Analysis," IDE Discussion Papers 29, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    7. 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.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Asao Ando & Bo Meng, 2019. "Spatial Price Equilibrium And The Transport Sector: A Trade‐Consistent Scge Model," Review of Urban & Regional Development Studies, Wiley Blackwell, vol. 31(3), pages 234-256, November.
    2. J. Peter Neary, 2009. "Putting the “New” into New Trade Theory: Paul Krugman's Nobel Memorial Prize in Economics," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(2), pages 217-250, June.
    3. Robson, Edward N. & Wijayaratna, Kasun P. & Dixit, Vinayak V., 2018. "A review of computable general equilibrium models for transport and their applications in appraisal," Transportation Research Part A: Policy and Practice, Elsevier, vol. 116(C), pages 31-53.
    4. Martin, Julien, 2012. "Markups, quality, and transport costs," European Economic Review, Elsevier, vol. 56(4), pages 777-791.
    5. Randall Jackson & Christa Court, 2015. "Toward Consistent Cross-Hauling Estimation for Input-Output Regionalization," Working Papers Working Paper 2015-01, Regional Research Institute, West Virginia University.
    6. Henryk Kierzkowski, 1988. "Strategic Trade, Embargoes, and Imperfect Competition," NBER Chapters, in: Issues in US-EC Trade Relations, pages 133-152, National Bureau of Economic Research, Inc.
    7. Krzysztof Kosiec, 2016. "Liberalisation of International Trade – The Case of Asymmetric Countries," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 8(3), pages 143-160, September.
    8. Eden, Benjamin, 2007. "Inefficient trade patterns: Excessive trade, cross-hauling and dumping," Journal of International Economics, Elsevier, vol. 73(1), pages 175-188, September.
    9. Andreas HaufLer & Guttorm Schjelderup & Frank Stähler, 2005. "Barriers to Trade and Imperfect Competition: The Choice of Commodity Tax Base," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(3), pages 281-300, May.
    10. Andersen, Torben M., 2005. "Product market integration, wage dispersion and unemployment," Labour Economics, Elsevier, vol. 12(3), pages 379-406, June.
    11. Pachara Lochindaratn, 2007. "Market Size, Market Structure, and Welfare Improving Regional Economic Integration: The Computable General Equilibrium Modelling Approach," EcoMod2007 23900053, EcoMod.
    12. repec:ags:ucdegw:232849 is not listed on IDEAS
    13. David Rezza Baqaee & Emmanuel Farhi, 2018. "Macroeconomics with Heterogeneous Agents and Input-Output Networks," NBER Working Papers 24684, National Bureau of Economic Research, Inc.
    14. Žigić, Krešimir, 2011. "Does a ‘non-committed’ government always generate lower social welfare than its ‘committed’ counterpart? Strategic trade policy when consumer surplus matters," Journal of Comparative Economics, Elsevier, vol. 39(4), pages 533-556.
    15. Rodolfo Helg & Riccardo Faini & Anna M. Falzoni & Marzio Galeotti & Alessandro Turrini, 2001. "Importing Jobs And Exporting Firms? On The Wage And Employment Implications Of Italy’S Trade And Foreign Direct Investment Flows," International Trade 0103001, University Library of Munich, Germany.
    16. Sourish Dutta, 2023. "Horizontal and Vertical Differentiation: Approaching Endogenous Measurement in Intra-industry Trade," Papers 2307.10660, arXiv.org, revised Aug 2023.
    17. Villena, Marcelo J. & Araneda, Axel A., 2017. "Dynamics and stability in retail competition," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 134(C), pages 37-53.
    18. Vatan, Antoine, 2013. "Habit formation and strategic interactions: A new gain from trade?," Economics Letters, Elsevier, vol. 121(1), pages 101-104.
    19. Bahar, Dany & Hausmann, Ricardo & Hidalgo, Cesar A., 2014. "Neighbors and the evolution of the comparative advantage of nations: Evidence of international knowledge diffusion?," Journal of International Economics, Elsevier, vol. 92(1), pages 111-123.
    20. Jung, Hanjoon Michael, 2011. "A Simple Model of Dairy Product Supply," MPRA Paper 29653, University Library of Munich, Germany.
    21. Arguello, Ricardo & Cicowiez, Martin, 2016. "Effects of an external shock on the economy of Bogota, Colombia," Conference papers 332781, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

    More about this item

    Keywords

    Armington Assumption; Spatial CGE; Elasticity of substitution; Trade coefficient; Econometric model;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jet:dpaper:dpaper204. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michitaka Imamitsu (email available below). General contact details of provider: https://edirc.repec.org/data/idegvjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.