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dc.contributor.authorZhai, Fanen_US
dc.date.accessioned2011-12-15T12:21:59Z-
dc.date.available2011-12-15T12:21:59Z-
dc.date.issued2008en_US
dc.identifier.urihttp://hdl.handle.net/10419/53516-
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.language.isoengen_US
dc.publisherAsian Development Bank Institute (ADBI) Tokyoen_US
dc.relation.ispartofseriesADB Institute Discussion Papers 108en_US
dc.subject.jelC68en_US
dc.subject.jelF12en_US
dc.subject.jelF17en_US
dc.subject.ddc330en_US
dc.subject.stwCGE-Modellingen_US
dc.subject.stwAußenwirtschaftstheorieen_US
dc.titleArmington meets Melitz: Introducing firm heterogeneity in a global CGE model of tradeen_US
dc.typeWorking Paperen_US
dc.identifier.ppn569582555en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
Appears in Collections:ADB Institute Discussion Papers, Asian Development Bank Institute

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