GTAP Resources: Resource Display
| GTAP Resource #4432 |
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"Trade Under the Threat of Tariff Hikes in General Equilibrium" by Deason, Lauren Abstract Abstract In this paper, I develop a multi-country, multi-industry dynamic stochastic general equilibrium model of trade with firms that are heterogeneous in productivity, and which must incur a one time sunk cost to begin producing as well as a one time sunk cost to begin exporting to a new market. I model tariffs as stochastic, with the bilateral tariff each period and for each country pair drawn from one of two possible values and where the draws follow a simple Markov process. I find that in this setting, fewer firms choose to enter into the export market in equilibrium when there exists the threat of a tariff hike relative to a deterministic setting where tariffs are fixed at their current value. Based on this model, I obtain numerical results for the impacts of an (exogenous) threat of reverting to a permanent non-cooperative tariff level. In a symmetric two-country setting, the effects are a 4.55% reduction in trade and a 0.02% reduction in welfare. I am further able to derive the effect of a tariff threat on third-countries and outside sectors not directly targeted, and find these effects to be small. |
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- Dynamic modeling - Multilateral trade negotiations - Preferential trading arrangements |
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Public Access  GTAP Resource 4432 (1.4 MB) Replicated: 0 time(s)Restricted Access No documents have been attached. Special Instructions No instructions have been specified. |
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Last Modified: 9/15/2023 2:05:45 PM
