آزاد سازی تجارت، تنوع محصول و رشد در یک اقتصاد باز کوچک : یک ارزیابی کمی
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|24915||2002||26 صفحه PDF||سفارش دهید||محاسبه نشده|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of International Economics, Volume 56, Issue 2, March 2002, Pages 247–272
We develop a numerical growth model that quantifies the welfare effects of trade liberalization. Additional intermediate input varieties provide the engine of growth and dramatically magnify the welfare gains from trade liberalization. In our central model, a 10% tariff cut leads to a 10.6% estimated gain in Hicksian EV. Systematic sensitivity analysis shows that there is virtually no chance of a welfare increase less than 3%, but a 6.6% chance of a welfare gain greater than 18%. We show that complementary reforms are crucial to fully realize the potential gains from the trade reform.
International trade economists have typically argued that an open trade regime is very important for economic development. This view has been based partly on neoclassical trade theory, which generally finds that a country improves its welfare from trade liberalization, partly on casual empirical observation that countries which remain highly protected for long periods of time appear to suffer significantly and partly on several empirical papers (e.g., Dollar, 1992; Edwards, 1993; Sachs and Warner, 1995) that find that trade or trade liberalization is beneficial to growth.1 A troubling problem is that the numerical modeling estimates of the impact of trade liberalization have generally found that trade liberalization increases the welfare of a country by only about one-half to one percent of GDP, gains which are very small in relation to the paradigm.2 The consistently small estimated welfare gains in constant returns to scale (CRTS) models of trade liberalization came to be known as the ‘Harberger constant.’ Although increasing returns to scale (IRTS) models (such as Harris, 1984) have produced gains up to 10% of GDP, the estimates remain less than convincing for a strong version of the paridigm.3 For many years authors have claimed that the welfare gains from trade liberalization would be much larger if the dynamic impact of trade liberalization were taken into account, but we are only beginning to develop such models.4 There are endogenous growth models, such as Young (1991), that show that if trade leads to specialization in products without productivity enhancing characteristics and there are no spillovers from trade, openness can be immizerizing. And Grossman and Helpman (1990) have shown that trade can induce shifts between the manufacturing and research and development sectors that can either speed up or slow down worldwide growth. On the other hand, there are many endogenous growth models (for example, Romer, 1990; Romer and Rivera-Batiz, 1991; Grossman and Helpman, 1991; Segerstrom et al., 1990) that show that trade liberalization unambiguously increases economic growth. Even these latter models, however, have not shown that trade liberalization has a large positive impact on welfare. That is, due to the complexity of the models the theoretical literature has necessarily focused on a comparison of the steady-state growth paths. The theoretical literature does not derive the dynamic adjustment path, the time it takes to converge to the new steady-state path, and does not evaluate the adjustment costs or foregone consumption necessary to achieve the new higher steady state growth path. That is, even if the theoretical endogenous growth literature has shown that trade liberalization results in a new higher steady-state growth path, there could be very small welfare gains if it takes a long time to reach the new growth path and there are large adjustment costs in the transition. For example, Connolly (1999) has developed a quality ladder numerical model of North–South trade in which the South learns how to imitate and innovate by trade. She shows that after the South opens to trade with the North, the North loses due to transition costs despite having a larger long run growth rate. Although our paper incorporates some additional dimensionality relative to the theoretical literature the principal contribution of our paper is not theoretical. Rather we derive the dynamic adjustment path which allows us to numerically evaluate the welfare effect and adjustment costs during the transition. International trade can have an impact on the total factor productivity of a country through a number of mechanisms (see Grossman and Helpman, 1991 for a general theoretical discussion). Our approach follows from Romer (1994) who emphasized that proper modeling of the impact of trade protection on the reduction in the number of available varieties is crucial to properly quantifying the welfare impact of trade liberalization. The crucial idea of our model is that imports of a larger variety of intermediate inputs allow producers to increase productivity through selection of intermediate inputs that more closely match their production requirements. Support comes from several sources: Caballero and Lyons (1992) who show that productivity increases in industries when output of its input supplying industries increases. Coe et al. (1997) find that foreign research and development increases domestic total factor productivity and that the positive spillover effect of foreign research and development is stronger the more open the economy is to intermediate inputs.5 Finally, Feenstra et al. (1999) show that increased variety of exports in a sector increase total factor productivity in most manufacturing sectors in Taiwan (China) and Korea, and they have some evidence that increased input variety also increases total factor productivity. We develop a dynamic small open economy model defined over a 54 year horizon, from 1997 to 2050 with terminal constraints which approximate an infinite horizon. There are two sectors X and Y. The Y sector produces goods for domestic and export markets under constant returns to scale (CRTS). Inputs into Y are labor and a pure intermediate good X. The good X is produced by both foreign and domestic firms under the large group monopolistic competition assumption and IRTS. 6 We employ the by now standard assumption that inputs of X affect the production of Y according to a Dixit–Stiglitz function. This means that additional varieties of X reduce the cost of producing Y. The only tax distortion in the economy in the benchmark data set is a twenty percent tariff on imports. We first construct a steady state growth path with which we can compare results of counterfactual experiments. We then reduce the tariff to ten percent and compare all variables to their values in the benchmark steady-state. We construct a series of counterfactual scenarios to determine the sensitivity of the results to tax, macro and financial policies, as well as to different tariff cuts and parameter specification. We evaluate the welfare consequences of a change in policies, i.e., we report the Hicksian equivalent variation for the infinitely-lived representative agent. Some of our most important results are as follows: with lump sum revenue replacement, reducing a tariff from 20 to 10% produces a welfare increase (in terms of Hicksian equivalent variation over the infinite horizon) of 10.6% of the present value of consumption in our central model. Systematic sensitivity analysis with over 34,000 simulations in this model showed that there is virtually no chance of a welfare gain of less than 3% but a 6.6% chance of a welfare gain larger than 18%. We investigated several modeling variants and performed a sensitivity analysis on all the key parameters and found that the welfare estimates for the same tariff cuts ranged up to 37.4% with capital flows, and down to 4.7% with our most inefficient replacement tax – a tax of capital. The latter result shows, importantly, that even the very inefficient tax on capital is superior to the tariff. Doubling the size of the tariff cuts, to better reflect the substantial liberalizations of many developing countries in the past 30 years, resulted in roughly doubling the estimated welfare gains. Large welfare gains in the model arise because the economy benefits from increased varieties of foreign X which dominate the decrease in varieties of domestic X. In order to assess the importance of variety gains, we perform the tariff reform in the same fully dynamic model, except that we assume that the X sector is subject to constant returns to scale and perfect competition; then additional varieties do not increase total factor productivity. In this model the ‘Harberger constant’ reemerges, as welfare gains are about 0.5% of the present value of consumption. Our results illustrate the crucial importance of complementary reforms to fully realize the potential gains from the trade reform. Notably, with the ability to access international capital markets, the gains are roughly tripled. Moreover, use of inefficient replacement taxes will significantly reduce the gains. These combined results show that complementary macroeconomic, regulatory, and financial market reforms to allow capital flows and efficient alternate tax collection are crucial to realize the potentially large gains from trade liberalization. The remainder of this paper is organized as follows. Section 2 outlines essential features of our model. Section 3 presents results and sensitivity analysis with respect to model structure and parameter specification. Section 4 concludes by briefly examining the results in the light of econometric evidence on the impact of trade liberalization on growth and discusses the role for optimal subsidies in this model.