Author: Terrie L. Walmsley
In this paper, some major modifications are made to the existing GTAP structure and database to incorporate a long-run closure in which changes in the ownership of capital stocks are determined endogenously and income earned on endowment commodities accrues to the owners of those endowments. This long-run closure assumes that in the long run all economies are growing at a common steady-state rate of growth, determined by the rate of population and technological growth. In order to ensure valid comparative statics the underlying growth rate in the database must equal this steady-state rate of growth. Shocks are imposed to equate the growth rates of capital across regions and thus create a steady-state database. Once the GTAP model and database have been modified, they are then used to simulate the long-run effects of Asia-Pacific trade liberalisation on welfare and gross national product. It is found that the foreign ownership of assets does have a significant effect on the projected outcome of trade liberalisation in the Asia-Pacific region.
JEL classification: C68, D33, F47
Working Paper Number IP-72 can be downloaded in PDF format. To print this you will need the Adobe Acrobat Reader.
Go to working papers page