EconStor >
Asian Development Bank Institute (ADBI), Tokyo >
ADBI Discussion Papers, Asian Development Bank Institute (ADBI) >

Please use this identifier to cite or link to this item:

Full metadata record

DC FieldValueLanguage
dc.contributor.authorZhai, Fanen_US
dc.description.abstractTraditional computable general equilibrium (CGE) models based on the Armington assumption fail to capture the extensive margin of trade, and thereby underestimate the trade and welfare effects of trade opening. To address this problem, this paper introduces the Melitz (2003) theoretical framework with firm heterogeneity and fixed exporting costs into a global CGE model. Some illustrative simulations show that the introduction of firm heterogeneity improves the ability of the CGE model to capture the trade expansion and welfare effects of trade liberalization. Under the case of a global manufacturing tariff cut, the estimated gains in welfare and exports are more than double those obtained from a standard Armington CGE model. Sensitivity analysis indicates that model results are sensitive to the shape parameters of firm productivity distribution, suggesting the need for further empirical work to estimate the degree of firm heterogeneity.en_US
dc.publisherAsian Development Bank Institute (ADBI) Tokyoen_US
dc.relation.ispartofseriesADB Institute Discussion Papers 108en_US
dc.titleArmington meets Melitz: Introducing firm heterogeneity in a global CGE model of tradeen_US
dc.typeWorking Paperen_US
Appears in Collections:ADBI Discussion Papers, Asian Development Bank Institute (ADBI)

Files in This Item:
File Description SizeFormat
569582555.pdf227.1 kBAdobe PDF
No. of Downloads: Counter Stats
Show simple item record
Download bibliographical data as: BibTeX

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.