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GTAP Resource #5013

"Trade Facilitation, Global Value Chains and Income Inequality"
by Ferraz, Lucas, Leopoldo Gutierre and Carolina Lemos

In this paper we investigate how trade facilitation reforms may foster integration of poorer economies into global value chains and how it may affect domestic as well as international income inequality. A set of CGE simulations using the dynamic version of the GTAP model is carried out where the results are evaluated according to the logic of integration into international supply chains as well as trade in value added, instead of the usual ‘gross” trade analysis. In this sense, we explore an innovative approach to evaluate the economic impacts of trade facilitation reforms in an increasingly interconnected global economy. We draw extensively on the recent input-output framework developed by Johnson and Noguera (2012) and extended by Koopman (2014) to evaluate trade in value added and how integrated into global value chains a given economy may be, based on a set of key value chain indicators described in Koopman (2014).
In the first part of this paper, costs of delays at customs are estimated based on their ad valorem equivalents. These ad valorem equivalents are calculated, for each country and each sector considered in the sample, according to per day costs of delays from Hummels and Schaur (2013), in conjunction with GTAP 9 database sectorial bilateral trade flows and average lengthy of delays in ports from Doing Business (World Bank). Reduction of time delays is implemented as shocks in the GTAP model, assuming that trade facilitation takes the form of technical progress in trading activities (Hertel et al, 2001).
The second part of this paper deals with how integration into Global Value Chains may impact on income inequality at the both national and international levels. In this regard, national trade facilitation indicators are correlated with real income gains for national factors of production such as qualified/unqualified workers and capital.

Resource Details (Export Citation) GTAP Keywords
Category: 2016 Conference Paper
Status: Published
By/In: Presented at the 19th Annual Conference on Global Economic Analysis, Washington DC, USA
Date: 2016
Created: Ferraz, L. (4/15/2016)
Updated: Ferraz, L. (4/15/2016)
Visits: 1,654
- Dynamic modeling
- Labor market issues
- Non-Tariff barriers

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