The Welfare Impact of Trade Liberalization

Abstract

This paper analyzes the distributional welfare impact of trade liberalization reforms on heterogeneous households. We develop a static applied general equilibrium model, and using a Social Accounting Matrix and Household Expenditure Survey, we calibrate it to match Slovenian data. We simulate the case of Slovenia joining the EU and quantify its welfare impact on households that differ in terms of age, income, and education. Additionally, we compare this benchmark case with two alternative scenarios: (1) a free trade agreement between Slovenia and the EU and (2) a custom union arrangement where tariff revenues are rebated proportionally to the households. We find that while trade liberalization leads to falling consumer prices, increased production in the export sectors, and aggregate welfare gains, the differentiated welfare impacts across heterogeneous households vary in their degrees. (JEL D58, F14, F15)

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“…Тем не менее, несмотря на тенденцию к переходу от прямого ограничения внешней торговли (таможенного тарифа) к косвенному (нетарифным мерам), существует достаточно эмпирических исследований [Кнобель, 2016;Cho, Diaz, 2011;Kehoe et al, 2011], подтверждающих положительное влияние либерализации внешней торговли на уровень экономического развития.…”

“…Аналогичные результаты приводятся в исследовании [Cho, Diaz, 2011], в котором с помощью модели общего равновесия было оценено изменение благосостояния во всех секторах экономики Словении до и после присоединения к ЕС. Основной вывод работы состоит в том, что проведенные реформы по либерализации торговли привели к падению цен импорта, снижению волатильности инфляции, росту производства в экспортном секторе и улучшению совокупного благосостояния граждан.…”

International Trade, Consumer Protection and Public Health in Nigeria: An Empirical Analysis

“…Increased foreign trade, if well managed and harnessed, not only engenders economic wellbeing of the populace, but also enhances the health and living standards of the people (Ozekhome, 2015). Standard trade theories assert that increased trade can engender welfare gains through efficient allocation of resources, exposure to international competition, transfer of goods and services, technology and knowledge spillovers and access to foreign market (Choi & Diaz, 2011). Nevertheless, the beneficial effect of trade can only be guaranteed in the presence of strong institutional and regulatory framework that enhance public welfare in the consumption of foreign goods with respect to consumer protection, against sub-standard and sub-optimal goods .…”

Oil Curse, Economic Growth and Trade Openness

“…Large-scale production is only beneficial if there is a large market for exports of that resource. Overall, international trade is associated with a more efficient allocation of natural resources that leads to an increase in social welfare(Cho & Diaz 2011).Another important feature of natural resources is the dominant position of this sector in national economies. Many of resource-rich countries tend to rely on a narrow range of export products.Figure 3shows the value of export product concentration index (PCI) of different13 The Middle East countries (Saudi Arabia, Iran, Iraq, Kuwait, Syria, United Arab Emirate, Qatar, Yemen and Oman) contain about 48 per cent of the world's total oil reserve, and Venezuela contains nearly 18 per cent as of 2016.…”