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Zonder onderwerpscode: economie

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This paper estimates the impacts on The Philippines of deep integration in a modern mega-preferential trade agreement, the Regional Comprehensive Economic Partnership. The paper assesses how the results differ with three versions of market structure: (i) perfect competition, Armington style; (ii) monopolistic competition Krugman style; and heterogeneous firms, Melitz style. The paper develops a new numerical model of foreign direct investment with heterogeneous firms where firms produce in the host country and demand corresponds to the "proximity burden," and is the first to apply a heterogeneous-firms model of foreign direct investment to preferential trade analysis. It also develops an extension of the Krugman model that allows small countries to impact the number of varieties. Both of these model extensions, as well as market structure, are crucial to the results. The trade and foreign direct investment responses are held constant across the three market structures. Lowering trade costs is examined from: (i) the reducing non-tariff barriers in goods; (ii) lowering barriers against foreign services providers, from foreign direct investment and cross-border; and (ii) facilitating trade. The results show that in all three market structures, there are substantial gains from deep integration, but virtually no gains from preferential tariff reduction. Both Krugman and Melitz style models produce significantly larger welfare gains than the Armington structure, especially in the impacts of foreign direct investment or with wider spillover effects on non- Regional Comprehensive Economic Partnership regions. The relationship between the welfare gains in the Krugman versus Melitz models is complex.

Deep Integration --- Foreign Direct Investment --- Heterogeneous Firms --- International Economics and Trade --- Preferential Trade Agreements --- Structural Gravity

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Given the growing importance of commitments to foreign investors in services in regional trade agreements, it is important to develop applied general equilibrium models to assess the impacts of liberalization of barriers to multinational service providers. This paper develops a 55 sector applied general equilibrium model of Kenya with foreign direct investment and Dixit-Stiglitz productivity effects from additional varieties of imperfectly competitive goods or services, and uses the model to assess its regional and multilateral trade options, focusing on commitments to foreign investors in services. To assess the sensitivity of the results to parameter values, the model is executed 30,000 times, and results are reported as confidence intervals of the sample distributions. The analysis reveals that a 50 percent preferential reduction in the ad valorem equivalents of barriers in all business services by Kenya with its African partners would be somewhat beneficial for Kenya. If a preferential agreement with African partners is combined with an agreement with the European Union, the gains would more than triple the gains of an Africa only agreement. Multilateral reduction of services barriers, however, would yield gains about 12 times the gains of an agreement with the Africa region alone. These results suggest that preferential liberalization in the region is a valuable first step, but wider liberalization, with larger partners and liberal rules of origin or multilaterally, will yield much larger gains due to providing access to a much wider set of services providers. The largest gains would come from domestic regulatory reform in services, as this would almost triple the gains of multilateral liberalization.

Domestic Investment --- Economic Theory & Research --- Emerging Markets --- Foreign Investors --- Free Trade --- Investment Policy --- Multinational Firms --- Public Sector Corruption & Anticorruption Measures --- Public Sector Development --- Trade Statistics --- Transport Economics Policy & Planning

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This paper employs a 55 sector small open economy computable general equilibrium model of the Kenyan economy to assess the impact of the liberalization of regulatory barriers against foreign and domestic business service providers in Kenya. The model incorporates productivity effects in both goods and services markets endogenously, through a Dixit-Stiglitz framework. It estimates the ad valorem equivalent of barriers to foreign direct investment based on detailed questionnaires completed by specialists in Kenya. The authors estimate that Kenya will gain about 11 percent of the value of Kenyan consumption in the medium run (or about 10 percent of gross domestic product) from a full reform package that also includes uniform tariffs. The estimated gains increase to 77 percent of consumption in the long-run steady-state model, where the impact on the accumulation of capital from an improvement in the productivity of capital is taken into account. Decomposition exercises reveal that the largest gains to Kenya will derive from liberalization of costly regulatory barriers that are non-discriminatory in their impacts between Kenyan and multinational service providers.

Air --- Banks and Banking Reform --- Economic Theory and Research --- Elasticities --- Elasticity --- Externalities --- Macroeconomics and Economic Growth --- Rail --- Road --- Transport --- Transport Economics, Policy and Planning --- Transportation --- Transportation costs --- Transportation network --- Transportation services

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Evidence indicates that trade costs are a much more substantial barrier to trade than tariffs are, especially in Sub-Saharan Africa. This paper decomposes trade costs into: (i) trade facilitation, (ii) non-tariff barriers, and (iii) the costs of business services. The paper assesses the poverty and shared prosperity impacts of deep integration to reduce these three types of trade costs in: (i) the East African Customs Union-Common Market of East and Southern Africa-South African Development Community "Tripartite" Free Trade Area; (ii) within the East African Customs Union; and (iii) unilaterally by the East African Customs Union. The analysis employs an innovative, multi-region computable general equilibrium model to estimate the changes in the macroeconomic variables that impact poverty and shared prosperity. The model estimates are used in the Global Income Distribution Dynamics microsimulation model to obtain assessments of the changes in the poverty headcount and shared prosperity for each of the simulations for the six African regions or countries. The paper finds that these reforms are pro-poor. There are significant reductions in the poverty headcount and the percentage of the population living in poverty for all six of the African regions from deep integration in the Tripartite Free Trade Area or comparable unilateral reforms by the East African Customs Union. Further, the incomes of the bottom 40 percent of the populations noticeably increase in all countries or regions that are engaged in the trade reforms. The reason for the poor share in prosperity is the fact that the reforms increase unskilled wages faster than the rewards of other factors of production, as the reforms tend to favor agriculture. Despite the uniform increases in income for the poorest 40 percent, there are some cases where the share of income captured by the poorest 40 percent of the population decreases. The estimated gains vary considerably across countries and reforms. Thus, countries would have an interest in negotiating for different reforms in different agreements.

CGE --- Economic Theory & Research --- Emerging Markets --- Foreign Direct Investment --- Free Trade --- International Economics & Trade --- Law and Development --- Macroeconomics and Economic Growth --- Microsimulation --- Non-Tariff Barriers --- Poverty Head Count --- Private Sector Development --- Regional Integration --- Services Liberalization --- Shared Prosperity --- Trade Costs --- Trade Facilitation --- Trade Law --- Trade Policy --- Tripartite Free Trade