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GTAP Resource #5042

"Effects of Transportation Infrastructure Reforms on the Export Participation and Composition"
by Baniya, Suprabha, Zeynep Akgul and Thomas Hertel

This paper examines the effect of an improvement in the quality of transportation infrastructure on the trade volume of existing exporters (intensive margin) and the number of new varieties being traded (extensive margin). Moreover, we aim to compare the implications in the processed to that in primary goods industries. For this policy analysis, we use the newly developed firm-heterogeneity general equilibrium model in GTAP (Akgul et al., 2015) complemented with the GTAP database version 9, which explicitly models consumers’ love-of-variety, endogenous changes in the number of varieties, and trade-induced productivity changes. Using this model, we examine if the effect of such reforms on the trade pattern vary across sectors that differ in terms of their level of processing and time intensity of inputs. Trade facilitation in the standard GTAP model is incorporated as an efficiency change in inputs by considering its implications on the effective price and quantity of imports from an exporter (Hertel et al., 2001). This model is extended in Mirza (2010) to link the LPI to the trade-augmenting technology variable that reduces variable trade costs in order to analyze the effect of investments in trade facilitation related capital goods on trade volume. We extend this development further, first by incorporating both the direct and indirect effects of such reforms. Secondly, we investigate the effect of such improvements on the trade-augmenting technology variables that reduce variable trade costs (productivity effects) and fixed trade costs (selection effects). In order to compute the required shock on the technology variables that will mimic the change in the targeted LPI, we econometrically specify the aggregate export volume based on a two-stage factor content model. The first stage estimates the effect of reforms on the probability that we observe a positive trade flow. The second stage estimates its effect on the trade volume conditional on export participation.

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: Baniya, S. (4/15/2016)
Updated: Baniya, S. (4/26/2018)
Visits: 2,533
- Calibration and parameter estimation
- Economic development
- Technological change
- Non-Tariff barriers
- Asia (Southeast)

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