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Measures of Trade Openness Using CGE Analysis

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  • Lloyd, P.J.
  • MacLaren, D.

Abstract

While a number of measures of openness have been used in empirical studies, none has a theoretical derivation. Using cge models of an economy, this paper derives a number of measures of opennesss which lie on the unit interval and have a welfare interpretation. One group of measure are transformations of the Uniform Tariff Equivalent which are zero for a closed economy and unity for a completely open economy, and have the property that national welfare increases monotonically with the measures of openess. An alternative measure is calculated as the ratio of the volume of trade in a restricted trade situation to that under the free trade situation. These measures are calculated for 8 regions of the world economy, using the GTAP model. We find close correspondence between all the cge measures but the ranking of countries according to these measures differs substantially from that of the actual trade ratios which are most commonly used in empirical studies.

Suggested Citation

  • Lloyd, P.J. & MacLaren, D., 1998. "Measures of Trade Openness Using CGE Analysis," Department of Economics - Working Papers Series 659, The University of Melbourne.
    • Handle: RePEc:mlb:wpaper:659
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    Cited by:

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    2. Maria Cipollina & Luca Salvatici, 2008. "Measuring Protection: Mission Impossible?," Journal of Economic Surveys, Wiley Blackwell, vol. 22(3), pages 577-616, July.
    3. Carvalho Pedro & Márquez Miguel A. & Díaz Montserrat, 2016. "Do neighbouring countries encourage the demand of international business tourism?," European Journal of Tourism, Hospitality and Recreation, Sciendo, vol. 7(3), pages 156-167, December.
    4. Cosmas S. Mbogela, 2019. "An Empirical study on the determinants of trade openness in the African economies," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 9(3), pages 1-2.
    5. Flôres Junior, Renato Galvão, 2008. "Are CGE Models still useful in economic policy making?," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 674, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    6. Ajayi, Patricia & Ogunrinola, Adedeji, 2020. "Growth, Trade Openness and Environmental Degradation in Nigeria," MPRA Paper 100713, University Library of Munich, Germany.
    7. Yanyan Sun & Sha Fan, 2023. "Chinese Outward Foreign Direct Investment and Innovation in Host Countries: Evidence from Countries Along the Belt and Road," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 15(2), pages 234-253, May.
    8. De Lombaerde, Philippe A.A., 2009. "On the dynamic measurement of economic openness," Journal of Policy Modeling, Elsevier, vol. 31(5), pages 731-736, September.
    9. Nagara, Patria & , yolanda, 2020. "The economic growth and affecting factors in Sumatera island," OSF Preprints rfcuj, Center for Open Science.
    10. Lloyd, P. J. & MacLaren, Donald, 2000. "Openness and growth in East Asia after the Asian crisis," Journal of Asian Economics, Elsevier, vol. 11(1), pages 89-105.
    11. Peter J. Lloyd & Donald Maclaren, 2004. "Gains and Losses from Regional Trading Agreements: A Survey," The Economic Record, The Economic Society of Australia, vol. 80(251), pages 445-467, December.
    12. Chandran, V.G.R. & Munusamy, 2009. "Trade openness and manufacturing growth in Malaysia," Journal of Policy Modeling, Elsevier, vol. 31(5), pages 637-647, September.
    13. Henningsen, Arne & Henningsen, Géraldine, 2012. "On estimation of the CES production function—Revisited," Economics Letters, Elsevier, vol. 115(1), pages 67-69.
    14. Peter Lloyd & Cassey Lee, 2016. "A Review of the Recent Literature on the Institutional Economics Analysis of the Long-Run Performance of Nations," Department of Economics - Working Papers Series 2019, The University of Melbourne.
    15. Godfred William Cantah & Gabriel William Brafu-Insaidoo & Emmanuel Agyapong Wiafe & Abass Adams, 2018. "FDI and Trade Policy Openness in Sub-Saharan Africa," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 44(1), pages 97-116, January.
    16. Scott McDonald & Terrie Walmsley, 2004. "Preferential Trade Agreements and the Optimal Liberalisation of Agricultural Trade," Working Papers 2004010, The University of Sheffield, Department of Economics, revised Aug 2004.

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    More about this item

    Keywords

    INTERNATIONAL TRADE ; ECONOMIC MODELS;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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