Specification Choice and Robustness in CGE Trade Policy Analysis with Imperfect Competition
Posted: 2 Jun 2004
In order to contribute to a more comprehensive understanding of the robustness of the quantitative results of applied trade policy simulations to variations in the assumptions about firm conduct, this article provides a systematic synopsis of alternative formulations of imperfectly competitive supply behaviour in applied general equilibrium trade models and examines the sensitivity of simulated trade policy effects to the specification choice and calibration strategy within a prototype multi-country model. The analysis suggests in particular, that simulation results are generally far more sensitive to numerical specification choices at the calibration stage, than to the prior choice of firm conduct specification.
Keywords: Trade policy, imperfect competition, scale economies, computable general equilibrium models
JEL Classification: F12, C63, D58
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