Global Trade Analysis Project Database Research Articles

A General Equilibrium Analysis on the Potential Effects of the African Continental Free Trade Area (AFCFTA) on African Economies

This study investigates the potential impact of the African Free Continental Trade Area on welfare, gross domestic product, labor demand, industrial output, and trade. To achieve the objectives, the study uses the Global Trade Analysis Project database 11. The database was used to aggregate Sub-Saharan Africa into five major regions according to geographical location Western, Southern, Northern, Eastern, and Central Africa. Sectors were grouped into agriculture, services, utility and construction, transportation and communication, heavy manufacturing, light, manufacturing, and extraction. The simulation scenario was conducted for three periods; 2025, 2030, and 2035. The result shows that gross domestic product will increase to 8,277,010 trillion by 2030. Western Africa will contribute the highest share followed by Northern, and Southern Africa. Trade result reveals that import and export will increase throughout the simulation periods with the highest potential discovered in southern Africa to be 34.1% for imports and 33.9% for exports in 2035. Labor demand shows an increase in 2025 and 2035 but a decline in 2030 in all sectors except agriculture which shows a resilience demand for labor up to 0.41%. The industrial output shows an increase in all periods with huge potential in the service industry with a 22.8% increase in 2035 followed by transportation with an 18.59% increase in 2035. Welfare also shows an increase through the periods with allocative efficiency producing the highest contribution to welfare with a total of 30% increase in all periods.

Wages and Income Impacts of a Liberal Migration Policy: An Experimental Study

Abstract This article investigates the impact of a liberal migration policy that increases labour quotas by 5% on wages and income of residents, native migrants, and new migrants. The article focuses on the impact of migration in 21 areas, with particular attention given to Slovakia and Germany. It is based on data collected from the Global Trade Analysis Project database and the experimental design by Walmsley, Ahmed, and Parsons, with adjustments to capture current global migration flows. The findings indicate that the immigration of new unskilled workers negatively impacts the real wages of unskilled residents, decreasing them by almost 3%, while the arrival of skilled workers increases them by 0.73%. Similarly, the real wages of skilled residents decrease by 2.62% due to the arrival of new skilled migrants, while unskilled migration results in its increase by 0.53%. These findings can aid policymakers in developing policies that maximize the benefits of migration. This research provides new insights into the wage effects of migration in different areas, focusing on Germany and Slovakia.

A Korea-Kenya Free Trade Agreement and Its Economic Impact: A Computable General Equilibrium Approach

Purpose – This study assesses the impact of a potential Korea-Kenya FTA on the global economy, which includes the US, EU, UK, China, and Japan, using the Global Trade Analysis Project (GTAP) model. Design/Methodology/Approach – The study employs a static global multi-sector CGE model using the GTAP database version 10 with the base year of 2014. For this study, we aggregate the 141 regions and 65 sectors of the GTAP database into 16 regions and 57 sectors. Four policy simulations were implemented based on tariffs and ad valorem equivalents (AVEs) of non-tariff measures (NTMs) estimated by Kitetu and Ko Jong-Hwan (2021). Findings – Simulation results suggest that the real GDP of Korea will likely increase by 0.001% to 0.002%, with welfare increasing by US$1.8 million to US$74.7 million. In comparison, the real GDP of Kenya will likely rise by 0.003% to 0.045%, while welfare will rise by US$1.8 million to US$ 75.3 million. Imports by both countries will rise at a higher rate than exports. For Kenya, domestic output increases in agriculture, extraction, and service sectors, and for Korea, output goes up in processed food and light and heavy manufacturing sectors. Research Implications – The novelty of this paper is in the first empirical quantification of the economic impact of a Korea-Kenya FTA on not only its members but also its trading partners, such as the US, EU, UK, China, and Japan. Moreover, this study provides a comprehensive overview of the impact of a potential FTA between Korea and Kenya by reducing and eliminating tariffs and AVEs of NTMs.

Incorporating Nutritional Accounts to the GTAP Data Base

With a wide range of implications for welfare, food security, land use, trade and the environment, nutrition-related policies pose complex questions that should be assessed using an approach that properly accounts for all the involved interactions. Widely used partial equilibrium models fail to properly account for the post-farmgate food value chains. At the same time, most of the available integrated assessment and computable general equilibrium models have some major limitations in terms of the consistent representation of nutritional data flows. In this paper, we address some of the limitations identified in the literature and develop an approach for incorporating nutritional accounts into the Global Trade Analysis Project (GTAP) Data Base, tracing quantities of food, calories, fats, proteins and carbohydrates along the value chains. We further showcase how the developed nutritional database can be linked to the standard GTAP model. A sample application is developed in the paper to provide an assessment of the impact of import tariff elimination on nutritional flows.

Developing an Air Pollutant Emissions Database for Global Economic Analysis

According to the Global Burden of Disease study (Cohen et al., 2017), in 2015 ambient air pollutant emissions caused 4.2 million deaths and a loss of 103.1 million disability-adjusted life-years, making it the fifth-ranked global risk factor. In terms of the welfare costs of mortality and illnesses associated with outdoor air pollutant emissions, global estimates for 2015 range between $2.7-3.2 trillion (Coady et al., 2015; OECD, 2016). Still, while greenhouse gas emissions are usually well represented in many global economic databases and models, air pollutant emission accounts in most cases are not included. In particular, this is the case for the widely used Global Trade Analysis Project (GTAP) Data Base and model. In this paper we describe the methodology used to produce a global air pollutant emissions dataset consistent with the GTAP Data Base version 10A. In addition to the non-land use sources, emissions from land use activities are estimated by land cover type, based on the volume of burned biomass and emission factors. The emissions database can be readily incorporated in GTAP-based computable general equilibrium models, enabling assessments of a wide range of policy questions, including the health co-benefits from climate mitigation policies. We illustrate an application of the air pollutant emissions database by tracking changes in primary PM2.5 emissions embodied in trade between 2004 and 2014.

Comparing Penalty Functions in Balancing and Dis-aggregating Social Accounting Matrices

Constructing a balanced and sufficiently detailed Social Accounting Matrix (SAM) is a necessary step for any work with Computable General Equilibrium (CGE) models. Even when starting with a given SAM, researchers might wish to develop their own, more detailed variants for a specific study by dis-aggregating sectors and products, a process termed splitting the SAM. We review three approaches for balancing and splitting a SAM: Cross-Entropy (CE), a Highest Posterior Density (HPD) estimator resulting in a quadratic loss penalty function, and a linear loss penalty function. The exercise considers upper and lower bounds on the (new) SAM entries, different weights for penalizing deviations from a priori information, and unknown row or column totals, to give the user flexibility in controlling outcomes. The approaches are assessed first by a systematic Monte-Carlo experiment. It re-balances smaller SAMs, after errors with known distributions are added. Here we find quite limited numerical differences between the CE and quadratic loss approaches. The CE approach was however considerably slower than the other candidates. Second, we tested the three approaches for dis-aggregating the Global Trade Analysis Project (GTAP) data base to provide, as an example, further agri-food detail. In such empirical applications, the distribution of the errors of the new SAM entries is typically not known. As in the SAM balancing exercise, we use CONOPT4 as a multi-purpose (non)linear solver which can be also be employed to solve the CGE model itself. For comparison, we add the specialized Linear and Quadratic Programming (QP) solvers CPLEDX and GUROBI. As in the Monte-Carlo experiment, the differences in results between the three approaches were moderate. The specialized solvers require very little time to solve the linear and quadratic loss problems. However, they did not achieve the same, very high accuracy as CONOPT4 for the quadratic loss problem. The CE problem could take longer by a factor of 100 or more, compared to a linear or quadratic loss approach solved with the specialized solvers. We conclude that using linear or quadratic loss approaches, especially combined with a specialized solver, are the most suitable candidates for larger SAM splitting / balancing problems. Additionally, we present a fast and accurate data processing chain to yield a benchmark data set for a CGE model from the GTAP Data Base which involves filtering out small cost, expenditure and revenue shares, and allows users to introduce further product and sectoral detail based on user provided information.

Comparison and analysis of tariff reduction of infrastructural sectors and its economic impact: ACGE approach

BACKGROUND AND OBJECTIVE: The reduction of tariffs in Public infrastructure sectors is believed to be one of the key factors in addressing the socio-economic challenges of high unemployment, income inequality, and poverty. The primary objective of this paper is to design a general equilibrium model for infrastructural sectors among Germany, France, Italy, United Kingdom, China, USA, Australia, Japan and Korea, and evaluate potential economic impact of tariff reduction. METHODS: The research method of this paper was to construct a Computational General Equilibrium model to assess the economic effects. The global trade analysis project model was calibrated and discussed in this paper. The global trade analysis project database was used to validate the model. FINDINGS: Simulation result showed that tariff removal in infrastructure has the most significant effects in China, Japan, and Korea’s economic growth and employment than other countries. Gross Domestic Product, output price, and social welfare increase significantly in China compared to other countries. Gross Domestic Product increases in China by 616%, decreases in Japan and Korea 77% and 7% after mutual tariff reduction on infrastructure sectors. Meanwhile, China’s export on infrastructural sector increases by 1.71%, Japan and Korea’s export increases by 0.75% and 0.05%. On the other hand, export decreases in Germany, France, Italy, UK, USA and Australia. Finally, social welfare increases in China by $2.26 billion and Japan by $239 million. CONCLUSION: The presence of tariff reduction in infrastructure sectors will likely strengthen the market share of most of the simulated regions. These findings may provide policy-makers with crucial information for better understanding about new tariff policy. Computable General Equilibrium analysis in infrastructure sectors had paid little attention in past and this paper tries to fill the gaps and attempts to find the benefit of mutual tariff policy among countries based on global trade analysis project model.

Drivers of carbon emission transfer in China—An analysis of international trade from 2004 to 2011

Currently, studies on global industrial carbon emissions focus more on emissions from finished products. However, the emissions resulting from intermediate products are significantly increasing every year. This study analyzes the intermediate carbon emission transfer effort of 140 countries/regions in the global production network based on data from the Global Trade Analysis Project database. Since China is the largest emitter of carbon dioxide in the world, we further analyze China's carbon transfer from the regional and sectoral perspectives. To this end, we use the structural decomposition analysis method to divide the factors influencing China's emission transfer into five parts: emission intensity, export per capita, export structure, population, and production structure. The results show that the net inflow of emissions in China results from the trade process between China and developed regions, including regions in North America and Western Europe, particularly in the sectors of mechanical and electronic equipment and chemical, rubber, and plastic products. Further, the main destinations of China's emission outflow are Latin America, South Asia, and Sub-Saharan Africa, particularly in the mineral, oil, and oilseed sectors. Moreover, emission intensity plays a crucial role in emission reduction, and production structure reversals negatively affect the growth of embodied emission. Finally, our analysis suggests that China should optimize its trade structure and promote low-carbon-emission technology.

Estimating International Trade Margins Shares by Mode of Transport for the GTAP Data Base

We estimate international transportation margin shares by mode of transport for the Global Trade Analysis Project (GTAP) Data Base. For each available origin-destination-GTAP sector triplet, we estimate the fractional share of the transport margin attributable to air, water, and other shipping modes. We use published relationships between ad valorem proportional changes in prices due to transportation costs and distances, weight-value ratios and fuel prices. Our final database contains 344,554 observations (origin-destination-sector-mode combinations) with transportation margin modal shares organized by 228 exporter countries, 209 importer countries, 45 traded GTAP sectors and 3 transportation modes. The main contribution of this article is to bring a more comprehensive set of information on trade by transport mode covering around 65% of global trade in 2004 and 55% in 2011. Our estimated shares contrast with those traditionally used in the GTAP Data Base which are extrapolations based solely on the modes of transport used by US exporters. A comparison of our shares with those used in version 9.0 of the GTAP Data Base reveals that the role of water transportation services in international trade is underestimated, while that of air transportation is overestimated. Overall, we find that estimations using the modal shares in version 9.0 of the GTAP Data Base overestimate the greenhouse gas emissions associated with international transport. Our new data were used to estimate transport margins by mode in Version 9.1 of the GTAP Data Base, and it is expected that our methods will be used to update future versions of the database.

Interregional price linkages of fossil-energy and food sectors: evidence from an international input–output analysis using the GTAP database

This study examined the impacts of price changes in fossil-energy resources on food prices across the world. We approached this issue with the input–output (IO) price model, which is suitable for evaluating the price effects due to cost-push (supply driven) processes through transaction linkages of intermediate goods. We employ an international interregional IO table comprising 14 regions and 57 industrial sectors, which is compiled from the global trade analysis project (GTAP) 9 database. The results revealed: (1) interregional price linkages are particularly strong between a wheat-producing region and energy producers in the adjacent regions; and (2) the world oil sector appears to exert the strongest effects on mechanized sectors (wheat, plant fibers and fishing) and regions practicing advanced agriculture (East Asia, the US, and Russia). Furthermore, a comparison with empirical observations suggests that approximately one tenth of observed 2-year price changes in US wheat in 2004–2016 can be explained by the cost-push processes derived from the world oil price changes.

Exploring the Links between Trade Reforms and Household Income Distribution in South Asia: A General Equilibrium Approach

Trade reforms in South Asia have been often associated in the popular debate with increases in income inequality and poverty. This creates a growing interest to investigate the link between trade liberalization, poverty and income distribution. This paper provides a quantitative assessment of the likely implications of trade liberalisation in South Asian economies, and in particular the impacts on the household sector. A multi-country computable general equilibrium model (CGE) was constructed by incorporating a multiple household framework into the Global Trade Analysis Project (GTAP) model. The database consists of household survey data of the respective South Asian economies and the version seven of the GTAP database which reflects the 2004 world economy. The study examines the effects of reductions in import tariffs under the SAFTA on the welfare and the income distribution of socio-economic household groups and the implications for government revenue in the respective South Asian economies. The results indicate that although the short-run household gains are limited, in the long-run there is a reallocation of resources from manufacturing to agricultural sectors. Benefits accrue to unskilled rural household labour and to skilled labour in urban households. However, trade liberalisation would lead to reductions in government revenue in all South Asian countries, which in turn may affect the overall welfare of the citizens in those economies.

Climate Change Impacts on Agriculture Using Improved Multi-Region Input-Output Framework

The agricultural sector plays a central role in the climate change adaptation and mitigation strategies. As one of the key global emitters of greenhouse gasses (GHGs), much effort has to be put in order to reduce its carbon footprint (Smith el al., 2014). At the same time, according to many studies, it is arguably the most vulnerable sector to face the impacts of global warming with both land and water availability, as well as yields productivity, being under pressure (Porter et al., 2014; Fischer et al., 2005). One of the approaches that attempts to consistently account for the global interactions between climate-related adaptation and mitigation strategies in the agricultural sector is the multi-region input-output (MRIO) framework (von Lampe et al., 2014). In particular, several modelling tools reported within the Agricultural Model Intercomparison and Improvement Project (AgMIP, 2014) are based on the input-output framework. In this study, we use a computable general equilibrium (CGE) model ENVISAGE (van der Mensbrugghe, 2017), which is based on the latest Global Trade Analysis Project (GTAP) Data Base (Aguiar et al., 2016), to provide an assessment of climate change impacts on agricultural sectors under the set of economic, climate change and adaptation scenarios within the AgMIP protocols. To this end, we dramatically improve the agricultural representation of the GTAP Data Base. This database can be considered an MRIO, which when reconciles its data inputs focuses on international datasets more than in the various Input-Output (IO) tables at its core.

Including Fossil-fuel Consumption Subsidies in the GTAP Data Base

Historically fossil-fuel consumption subsidies have been one of the most widely used energy and public policy interventions. According to the International Energy Agency (IEA), in 2014 they amounted to $493 billion worldwide, which is equivalent to 0.6% of global GDP. Their contribution is even more significant for most energy exporting countries, in many cases exceeding 5-15% of national GDP. However, despite their large magnitude, fossil-fuel consumption subsidies are not explicitly represented in most global economic databases and models, including the Global Trade Analysis Project (GTAP) Data Base, as they are generally not captured by the input-output framework. In this paper, we present methods to integrate pre-tax fossil-fuel consumption subsidies to the GTAP Data Base and produce a version of the GTAP 9.2 Data Base that includes these subsidies. The proposed approach includes updates of energy commodity market prices and corresponding tax rates, within the GTAP Data Base build process. Including fossil-fuel consumption subsidies in the GTAP Data Base provides several benefits for energy and environmental policy simulations, including availability of an additional policy instrument and more consistent representation of energy prices.

The Standard GTAP Model in GAMS, Version 7

The purpose of this paper is to describe a version of the Global Trade Analysis Project (GTAP) computable general equilibrium (CGE) model implemented in the General Algebraic Modeling System (GAMS) that is a literal implementation of the standard General Economic Modeling Package (GEMPACK) version. There are a number of GAMS-basedmodels that rely onthe basic GTAPData Basestructure, butnoneisan exact replica of the GTAP model itself. This paper relies on version 7.0 of the GTAP model released in 2017 and that represents the latest version of the ’standard’ GTAP model, acknowledging that there are multiple variants. The code has been tested with release 9 of the GTAP Data Base that has 57 commodities and 140 countries/regions

Introducing Irrigation Water into GTAP Data Base Version 9

Water is an essential input in the production processes of all goods and services. However, most economic models ignore water as an essential factor of production. In contrast with other inputs, economic data do not reflect the role of water in the production processes of goods and services and its final value in the demand side. This makes it difficult to incorporate water in economic models, properly examine its role in economic activities, and study its interaction with other inputs in the production processes. Introducing water into an economy-wide database such as Global Trade Analysis Project (GTAP) Data Base which has been widely used by many economic modelers across the world could help them to extend their research agendas on the role and importance of water in economic activities. As the first step towards this direction we divided the crop sectors of the GTAP-Power Data Base (which extends the GTAP Data Base Version 9 by disaggregating the electricity sector) into irrigated and rainfed categories and explicitly included water for irrigation into the cost structure of irrigated crops by river basin at the Agro Ecological Zone (AEZ) level.

A computable general equilibrium assessment of Japan’s nuclear energy policy and implications for renewable energy

This study assesses the economic and environmental impacts of Japan’s nuclear power scenarios and examines the implications for renewable energy. To assess nuclear power scenarios, we use the following three scenarios: “new policy scenario” of the International Energy Agency as a reference; a 40-year operational time limit of nuclear power plants; and no restart of nuclear power plants. For all scenarios, renewable energy with feed-in tariffs is considered. In addition, to assess the impact on the international competitiveness of Japanese industry, we construct a multi-regional, recursive dynamic computable general equilibrium model based on version 8.1 of the Global Trade Analysis Project database. Compared to the reference scenario, the other two scenarios increase CO2 emissions through an increase in fossil fuel electricity generation and decreases Japan’s real gross domestic product, although renewable energy supply also increases. In particular, a nuclear power phase-out negatively impacts Japan’s energy-intensive and trade-exposed sectors. However, our model does not consider externalities from fossil fuel usage and nuclear risk. The results of this simulation study represent the first step in answering important questions on energy policy but further research on externalities of fossil fuel and nuclear power usage should be conducted.

The GTAP-Power Data Base: Disaggregating the Electricity Sector in the GTAP Data Base

Computable general equilibrium (CGE) models are ubiquitous in energy and environmental economic research. Recent technological advancements in electricity fuels, generation technologies, and environmental policies which target specific generation technologies (e.g. emission regulations) have motivated detailed CGE modeling of the electricity sector. Modeling these issues requires distinct electricity generating technologies in a CGE database. Researchers using the Global Trade Analysis Project (GTAP) Data Base have disaggregated the electricity sector into generating technologies independently using largely disparate, incomparable methodologies. This paper presents the methodology used to create the GTAP-Power Data Base, an electricity-detailed extension of the GTAP 9 Data Base with the following disaggregated electricity sectors: transmission and distribution, nuclear, coal, gas, hydroelectric, wind, oil, solar, and other. Gas, oil, and hydroelectric are further differentiated as base and peak load. The “bottom-up” data are electricity generation and levelized input costs for each technology and region. The levelized input costs for each technology are estimated to be as close as possible to the original data, but consistent with the original GTAP 9 Data Base. Major limitations in the initial version of the GTAPPower Data Base are the lack of regional coverage in input cost data and disparity between available data and the total values for the electricity aggregate. All of the GTAP 9 Data Base is included in the GTAP-Power Data Base.

An Overview of the GTAP 9 Data Base

This paper provides an overview of the Global Trade Analysis Project (GTAP) Data Base and its latest release, version 9. The GTAP Data Base has been used in thousands of economy-wide analyses over the past twenty-five years. While initially focused on supporting trade policy analysis, the addition of satellite accounts pertaining to greenhouse gas emissions and land use has resulted in a surge of applications relating to climate change as well as other environmental issues. The Data Base comprises an exhaustive set of accounts measuring the value of annual flows of goods and services with regional and sectoral detail for the entire world economy. These flows include bilateral trade, transport, and protection matrices that link individual country/regional economic datasets. Version 9 disaggregates 140 regions, 57 sectors, 8 factors of production, for 3 base years (2004, 2007 and 2011). The great success enjoyed by this Data Base stems from the collaboration efforts by many parties interested in improving the quality of economic analysis of global policy issues related to trade, economic development, energy and the environment.

ASEAN’s initiatives for regional economic integration and the implications for maritime logistics reforms

Purpose– The purpose of this paper is to estimate the economic impact of reducing logistics cost on the demand for port throughput in the context of Association of Southeast Asian Nations’ (ASEAN) regional economic integration and to realize the potential economic gains of the maritime logistics reform in the region.Design/methodology/approach– The main part of this paper is to formulate conversion coefficients for containerized cargo to estimate the impacts of logistics reform on the demand for port throughput. These conversion coefficients, then have been used into a dynamic computational general equilibrium model using Global Trade Analysis Project database to explore the impact of logistics cost.Findings– The study demonstrates that logistics efficiency is a challenge for ASEAN economic integration, providing significant implications for maritime logistics reforms.Research limitations/implications– This study assumes uniform improvements of 5 and 10 percent in the logistics sector for all countries due to lack of detailed data on the logistics sectors in ASEAN countries.Practical implications– The findings of this study could help ASEAN policymakers for deeper understanding of efficient maritime logistics in realizing the economic gains from its regional economic integration initiatives.Originality/value– Although there are many descriptive studies on the importance of logistics efficiency in improving international competitiveness in a country or a region, these are not supported by quantitative assessment in the case of ASEAN. This study addresses the dearth of empirical evidence based on real data on trade and maritime cargo flows. This study contributes to highlighting that ASEAN countries should reform their logistics policies and practices.

Transatlantic Trade and Investment Partnership and Trans‐Pacific Partnership: Policy Options of China

AbstractAs a result of deadlocked multilateral trade negotiations, many countries have embarked on the establishment of bilateral and regional trade agreements. Using the Global Trade Analysis Project database and a computable general equilibrium model, our paper focuses on the impacts of the Transatlantic Trade and Investment Partnership (TTIP) and the Trans‐Pacific Partnership (TPP) on the Chinese economy under three scenarios. The results suggest that when only the TTIP is realized, Chinese economic variables are negatively affected. When both the TTIP and the TPP are realized and China is excluded, the combined damage to the Chinese economy is higher than the damage with the TTIP alone. However, the inclusion of China in the TPP has a positively effect on economic variables in China. This indicates that the impacts of China's participation in the TPP compensate for the negative impacts of the TTIP. Therefore, China should consider being part of the TPP to offset the negative impacts of the TTIP.