Estimates of the Trade and Welfare Effects of NAFTA

Caliendo, Lorenzo; Parro, Fernando

doi:10.1093/restud/rdu035

Cited by 898 publications

(386 citation statements)

References 40 publications

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“…This approach is consistent with Caliendo and Parro () who use input–output tables to account for the inter‐dependence across industries. My formulation simply uses information from the input–output tables on a more aggregate level.…”

supporting

confidence: 82%

“…financial services) being used relatively more extensively. Including these input–output linkages in quantitative trade models is essential for evaluating welfare gains correctly (Ossa, ; Caliendo and Parro, ). Amiti and Konings () show that a reduction in the tariff on intermediate inputs offers substantial gains in productivity.…”

Section: Related Literaturementioning

confidence: 99%

“…Modelling production with these three sectors is motivated by the data from the aggregate input–output tables. Including intermediate inputs and a non‐tradable sector is important in order to identify welfare gains correctly (Goldberg et al ., ; Caliendo and Parro, )…”

Section: Modelmentioning

confidence: 99%

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On Measuring the Welfare Gains from Trade Under Consumer Heterogeneity

Nigai

2015

The Economic Journal

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I develop a multi-country, multi-industry model of trade that features heterogeneous consumers with non-homothetic preferences. I use the model to quantify the measurement errors in the welfare gains estimates caused by the assumption of a representative consumer (ARC). First, I reduce the world level of all trade costs by 15% and find that ARC overestimates (underestimates) the gains of the poor (rich) by up to 5 (11) percentage points. Second, I eliminate import tariffs around the globe and show that the loss of tariff revenues is not negligible for some consumers and that the measurement errors from ARC are between À15 and 4% points.Surveys frequently point to the enormous heterogeneity in individual attitudes towards free trade policies. While a majority of relatively rich and educated individuals seems to favour lowering barriers to trade, up to 80% of the poor do not feel helped by globalisation and consistently oppose free trade policies.1 What is the reason for this large gap between the poor and the rich in terms of their views on the potential benefits from international trade? Conventional wisdom suggests that the reason for this disparity is broadly related to the Stolper-Samuelson-type effects when people with different skills, abilities or employment statuses experience heterogeneous effects of trade on their earnings.2 I argue, however, that even in the absence of asymmetric wage effects, the welfare gains from trade are highly heterogeneous across consumers due to consumer-specific price effects. For instance, in 2006 in the US, 32% of consumers believed that free trade agreements would lead to a decrease in domestic prices, while 30% believed they would increase them and 23% expected no significant change. This large degree of heterogeneity of opinions suggests that people consume different bundles of goods and that the price effects of trade liberalisation may be asymmetric across those bundles. I develop a general equilibrium model of trade that gets to grips with these two features by combining consumer heterogeneity, nonhomotheticity of preferences and sector-specific trade elasticity parameters. In the

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supporting

confidence: 82%

Section: Related Literaturementioning

confidence: 99%

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On Measuring the Welfare Gains from Trade Under Consumer Heterogeneity

Nigai

2015

The Economic Journal

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“…We consider that preferences are identical in both countries, and we use the average of the shares of household revenue spent on industrial goods in the United States (95%) and RoW (86%) to obtain

b^{*} = b = 90.3

% . For crop yields, we use

θ = 8.11

as estimated by Caliendo and Parro (), and the relative agricultural productivities (864 USD/ha for the United States and 1,414 USD/ha for RoW on average between 2012 and 2014) to obtain

T^{*} / T = 1.63

. The disutility of pesticides is difficult to calibrate because of a lack of data.…”

Section: The Case Of Asymmetric Countriesmentioning

confidence: 99%

Food Trade and Biodiversity Effects

Bellora

Bourgeon

2019

Int Economic Review

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Pests create biodiversity effects that increase food production risks and decrease productivity when agricultural production is specialized. Pesticides contain these effects, but damage the environment and human health. When opening to trade, governments are tempted to restrict pesticide use because, with more food being imported, less pesticide is needed for domestic consumption. However, pesticide restrictions hinder the competitiveness of their agricultural sector on international markets. We show that restrictions on pesticides are more stringent under free trade than under autarky, which reduces the gains from trade, and that trade increases food price volatility.

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“…Caliendo and Parro's () approach of estimating the trade cost elasticity based on the “tetrads” method (cf. Head and Mayer, ) results in estimates (cf.…”

mentioning

confidence: 99%

Border Effects Without Borders: What Divides Japan's Internal Trade?

Wrona

2018

Int Economic Review

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This article identifies a “border” effect in the absence of a border. The finding that trade between east and west Japan is 23.1% to 51.3% lower than trade within both country parts is established despite the absence of an obvious east–west division due to historical borders, cultural differences, or past civil wars. Postwar agglomeration processes, reflected by the contemporaneous structure of Japan's business and social networks, instead of cultural differences, induced by long‐lasting historical shocks, are identified as an explanation for the east–west bias in intra‐Japanese trade.

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Estimates of the Trade and Welfare Effects of NAFTA

Cited by 898 publications

References 40 publications

On Measuring the Welfare Gains from Trade Under Consumer Heterogeneity

On Measuring the Welfare Gains from Trade Under Consumer Heterogeneity

Food Trade and Biodiversity Effects

Border Effects Without Borders: What Divides Japan's Internal Trade?

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