The Welfare Analysis of a Free Trade Zone: Intermediate Goods and the Asian Tigers

20 Pages Posted: 10 Jul 2008

See all articles by Andrew Feltenstein

Andrew Feltenstein

Georgia State University - Department of Economics

Florenz Plassmann

SUNY at Binghamton, Department of Economics

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Abstract

We analyse trade reform among the ASEAN countries, which recently began removing all mutual trade barriers. The standard method to avoid complete specialisation in traded goods is to distinguish goods both by physical type and place of origin (the so-called Armington assumption). This methodology is not suitable for the sort of intermediate goods produced by the ASEAN countries. We develop a computational approach in the context of a non-Armington dynamic general equilibrium model. Analysing the results of a calibrated version of the model, we find that trade liberalisation is generally welfare improving for the ASEAN countries.

Suggested Citation

Feltenstein, Andrew and Plassmann, Florenz, The Welfare Analysis of a Free Trade Zone: Intermediate Goods and the Asian Tigers. World Economy, Vol. 31, Issue 7, pp. 905-924, July 2008. Available at SSRN: https://ssrn.com/abstract=1157609 or http://dx.doi.org/10.1111/j.1467-9701.2008.01108.x

Andrew Feltenstein (Contact Author)

Georgia State University - Department of Economics ( email )

P.O. Box 3992
Atlanta, GA 30302-3992
United States
404-4130093 (Phone)

Florenz Plassmann

SUNY at Binghamton, Department of Economics ( email )

Binghamton, NY 13902-6000
United States
607-777-4304 (Phone)

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