Lisandro Abrego - Academia.edu (original) (raw)
Papers by Lisandro Abrego
Asean Economic Bulletin, 2002
This paper forms part of a project on Globalisation and Social Exclusion supported by the Targete... more This paper forms part of a project on Globalisation and Social Exclusion supported by the Targeted Socio
Despite a large volume of literature, there has been relatively little numerical use of structura... more Despite a large volume of literature, there has been relatively little numerical use of structural models when trying to decompose observed wage changes resulting from joint trade and technology shocks into portions attributable to each source. This paper highlights a series of difficulties with the numerical performance of widely used theoretical structures for decomposition experiments, which raise questions as to their suitability for this purpose. For small open economies, the conventional Heckscher-Ohlin-type model implemented with convenient functional forms (Cobb-Douglas, CES) reveals problems of specialisation unless the price changes accompanying trade shocks are small. As a result, this model is typically unable to accommodate large international price changes in performing decompositions. The model can also yield wide ranges for decomposition from alternative parameterisations consistent with the same wage change. In addition, as Leamer (1994) has argued, the structure ca...
This paper uses computational techniques to assess whether or not various propositions that have ... more This paper uses computational techniques to assess whether or not various propositions that have been advanced as plausible in the literature on regional trade agreements may actually hold. The idea is to make probabilistic statements as to whether propositions of interest might hold, rather than to restrict assumptions so they unambiguously hold. Our aim is to blend theory and numerical simulation and go beyond the ambiguous analytically derived propositions that dominate the theoretical literature so as to assess the likelihood of propositions holding for particular model specifications.
Recent literature has explored both physical and policy linkage between trade and environment. He... more Recent literature has explored both physical and policy linkage between trade and environment. Here we explore linkage through leverage in bargaining, whereby developed countries can use trade policy threats to achieve improved developing country environmental management, while developing countries can use environmental concessions to achieve trade disciplines in developed countries. We use a global numerical simulation model to compute bargaining outcomes from linked trade and environment negotiations, comparing developeddeveloping country bargaining only on trade policy with joint bargaining on both trade and domestic environmental policies. Results indicate joint gains from expanding the trade bargaining set to include environment, opposite to the current developing country reluctance to negotiate in the World Trade Organization on this issue. However, compared to bargaining with cash side payments, linking trade and environment through negotiation on policy instruments provides ...
This paper quantifies the welfare impact of unilateral trade liberalization and computes the opti... more This paper quantifies the welfare impact of unilateral trade liberalization and computes the optimal tariff structure for Costa Rica in the presence of trade-policy-induced international capital flows and foreign capital taxation. For this, an applied general equilibrium model integrating trade, capital flows and international capital income taxation is used. The model has been calibrated to a 1990-91 data set for the economies of Costa Rica and a group of OECD countries. In the model, foreign capital income is taxed by host countries and the tax-credit system operates in foreign investors home countries. Results for Costa Rica show that complete trade liberalization ends up being welfare-reducing, as it leads to an outflow of capital and loss of tax revenue which more than offset the efficiency gains from an enhanced resource allocation. The optimal tariff structure for the Costa Rican economy turns out to be a mixture of import tariffs and subsidies, though of a relatively small l...
This paper reports on research that uses computational techniques to assess whether or not variou... more This paper reports on research that uses computational techniques to assess whether or not various propositions that have been advanced as plausible in the literature on the theory of customs unions actually hold. This research blends theory and numerical simulation to get insights into the likelihood that various theoretical propositions prposed in the customs union literature hold. JEL classification codes F10, F13, F15
This paper uses computational techniques to assess whether or not var-ious propositions that have... more This paper uses computational techniques to assess whether or not var-ious propositions that have been advanced as plausible in the literature on regional trade agreements may actually hold. The idea is to make proba-bilistic statements as to whether propositions of interest might hold, rather than to restrict assumptions so they unambiguously hold. Our aim is to blend theory and numerical simulation and go beyond the ambiguous ana-lytically derived propositions that dominate the theoretical literature so as to assess the likelihood of propositions holding for particular model speci…-cations. JEL classi…cation codes F10, F13, F15
This paper explores the use of structural models as an alternative to reduced form methods when d... more This paper explores the use of structural models as an alternative to reduced form methods when decomposing observed joint trade and technology driven wage changes into components attributable to each source. Conventional mobile factors Heckscher-Ohlin models typically reveal problems of specialisation unless price changes accompanying trade shocks are small, and can also produce wide ranges for the decomposition for parameterisations consistent with the joint change. A differentiated goods model which generalises Heckscher-Ohlin removes problems of specialisation and concentrates the range of decompositions more narrowly, but introduces larger demand side responses to trade shocks which greatly reduce the effect of trade. The conclusion offered is that the choice of structural model matters for decomposing observed wage changes into trade and technology components, and that reduced-form methods which do not discriminate between alternative structural models may not be that informat...
This paper explores the use of structural models as an alternative to reduced form methods when d... more This paper explores the use of structural models as an alternative to reduced form methods when decomposing observed joint trade and technology driven wage changes into components attributable to each source. Conventional mobile factors Heckscher-Ohlin models typically reveal problems of specialisation unless price changes accompanying trade shocks are small, and can also produce wide ranges for the decomposition for parameterisations consistent with the joint change. A differentiated goods model which generalises Heckscher-Ohlin removes problems of specialisation and concentrates the range of decompositions more narrowly, but introduces larger demand side responses to trade shocks which greatly reduce the effect of trade. The conclusion offered is that the choice of structural model matters for decomposing observed wage changes into trade and technology components, and that reduced-form methods which do not discriminate between alternative structural models may not be that informat...
This paper discusses the reasonableness of assumptions used in theoretical trade models, noting t... more This paper discusses the reasonableness of assumptions used in theoretical trade models, noting that it is common in theoretical literature to make the assumption that in a multi-country, multi-good world, the direction of trade (import and export by commodity) is predetermined and fixed for each good for each country. Comparative static exercises with such models, such as the analysis of alternative regional trade agreements (customs unions, for instance) are typically assumed to leave the direction of trade in each good unchanged for each country. Here, we both provide computational evidence as to the reasonableness of this assumption and an indication as to how the reasonableness of assumptions used elsewhere may be gauged. We consider a simple three-country, threegood, pure-exchange model with CES preferences. We compute free trade competitive equilibria, three-country non-cooperative Nash equilibria, and customs union equilibria for randomized parameterizations, and find that t...
This thesis uses general-equilibrium numerical-simulation techniques to analyse trade and environ... more This thesis uses general-equilibrium numerical-simulation techniques to analyse trade and environmental issues. It tries to take applied general equilibrium modelling in these areas beyond their traditional confines in a number of ways. These include endogenous incorporation of international capital flows into trade models, decomposition of observed economic outcomes, and computation of bargaining solutions and non-cooperative equilibria. Chapter 1 analyses the welfare, income distribution and macroeconomic implications of trade liberalisation and increased indirect taxation in El Salvador. It is found that these policies have little effect on welfare and income distribution, but a significant impact on macroeconomic aggregates. Chapter 2 examines trade liberalisation when foreign direct investment (FDI) flows and international capital income taxation are present, using data for Costa Rica. The main finding is that, once FDI flows and its taxation are taken into consideration, trade...
Coase’s seminal 1960 paper on externalities is associated with the so-called Coase Theorem which ... more Coase’s seminal 1960 paper on externalities is associated with the so-called Coase Theorem which is stated in the literature in many forms. However, its main thrust was less to state a theorem than to challenge Pigou’s earlier insistence on the need for government intervention through Pigouvian taxes to achieve internalisation of externalities. Coase argued instead that private party bargaining can be relied upon to internalise externalities, but equally insisted that establishing clear and firm property rights is a precondition to successful internalisation achieving bargaining. Similar thinking has lead to clear definitions of property rights becoming a key part of World Bank conditionality in the environmental area. This paper discusses the underpinnings of this position, arguing that it is little researched and subject to challenge. We first show how Coase only considered one type of property right, and where others such as compensation rights are allowed for the property right ...
This paper analyses debt relief efforts by creditors to alleviate the debt burden of lowincome co... more This paper analyses debt relief efforts by creditors to alleviate the debt burden of lowincome countries. The Heavily Indebted Poor Countries (HIPC) Initiative builds on traditional debt relief, and for the first time involves relief on multilateral debt. It seeks to reduce debt to sustainable levels and eliminate any debt overhang that might hinder growth and investment. It provides substantial debt relief to eligible countries by reducing their overall debt stocks by about one-half, or, together with traditional relief over time, by some 80 per cent. It lowers debt service payments of HIPCs substantially, provides room for increased social spending, and provides a solid basis for debt sustainability. The latter requires efforts by both debtors and creditors. To find poverty reduction efforts, HIPC relief is important, but much broader international support is needed as external transfers to HIPCs in the past far exceeded debt service paid. Experience has shown that external suppor...
In this paper we investigate the powerful implications of the Stolper-Samuelson theorem, which us... more In this paper we investigate the powerful implications of the Stolper-Samuelson theorem, which uses the Heckscher-Ohlin model to predict strong links between changing trade prices and wage inequalities. We summarise recent work, which shows that these theoretical links are, in fact, far stronger than indicated by empirical evidence or simplified reduced-form regressions. We point out that the literature outlines many reasons to doubt the validity of the Heckscher-Ohlin model, and summarise various general equilibrium studies of advanced countries which indicate that relaxation of the assumptions of the Heckscher-Ohlin model can greatly undermine the Stolper-Samuelson conclusions. We conclude that, while increased trade with developing countries has probably played some part in the widening wage inequalities in the UK and USA, there is considerable doubt over how large this role is. There are good reasons for believing that, contrary to the usual conclusions of the Stolper-Samuelson ...
SSRN Electronic Journal
In March 2018, representatives of member countries of the African Union signed the African Contin... more In March 2018, representatives of member countries of the African Union signed the African Continental Free Trade Area (AfCFTA) agreement. This agreement provides a framework for trade liberalization in goods and services and is expected to eventually cover all African countries. Using a multi-country, multi-sector general equilibrium model based on Costinot and Rodriguez-Clare (2014), we estimate the welfare effects of the AfCFTA for 45 countries in Africa. Three different model specifications—comprising both perfect competition and monopolistic competition—are used. Simulations include full elimination of import tariffs and partial but substantial reduction in non-tariff barriers (NTBs). Results reveal significant potential welfare gains from trade liberalization in Africa. As intra-regional import tariffs in the continent are already low, the bulk of these gains come from lowering NTBs. Overall gains for the continent are broadly similar under the three model specifications used, with considerable variation of potential welfare gains across countries in all model structures.
Asean Economic Bulletin, 2002
This paper forms part of a project on Globalisation and Social Exclusion supported by the Targete... more This paper forms part of a project on Globalisation and Social Exclusion supported by the Targeted Socio
Despite a large volume of literature, there has been relatively little numerical use of structura... more Despite a large volume of literature, there has been relatively little numerical use of structural models when trying to decompose observed wage changes resulting from joint trade and technology shocks into portions attributable to each source. This paper highlights a series of difficulties with the numerical performance of widely used theoretical structures for decomposition experiments, which raise questions as to their suitability for this purpose. For small open economies, the conventional Heckscher-Ohlin-type model implemented with convenient functional forms (Cobb-Douglas, CES) reveals problems of specialisation unless the price changes accompanying trade shocks are small. As a result, this model is typically unable to accommodate large international price changes in performing decompositions. The model can also yield wide ranges for decomposition from alternative parameterisations consistent with the same wage change. In addition, as Leamer (1994) has argued, the structure ca...
This paper uses computational techniques to assess whether or not various propositions that have ... more This paper uses computational techniques to assess whether or not various propositions that have been advanced as plausible in the literature on regional trade agreements may actually hold. The idea is to make probabilistic statements as to whether propositions of interest might hold, rather than to restrict assumptions so they unambiguously hold. Our aim is to blend theory and numerical simulation and go beyond the ambiguous analytically derived propositions that dominate the theoretical literature so as to assess the likelihood of propositions holding for particular model specifications.
Recent literature has explored both physical and policy linkage between trade and environment. He... more Recent literature has explored both physical and policy linkage between trade and environment. Here we explore linkage through leverage in bargaining, whereby developed countries can use trade policy threats to achieve improved developing country environmental management, while developing countries can use environmental concessions to achieve trade disciplines in developed countries. We use a global numerical simulation model to compute bargaining outcomes from linked trade and environment negotiations, comparing developeddeveloping country bargaining only on trade policy with joint bargaining on both trade and domestic environmental policies. Results indicate joint gains from expanding the trade bargaining set to include environment, opposite to the current developing country reluctance to negotiate in the World Trade Organization on this issue. However, compared to bargaining with cash side payments, linking trade and environment through negotiation on policy instruments provides ...
This paper quantifies the welfare impact of unilateral trade liberalization and computes the opti... more This paper quantifies the welfare impact of unilateral trade liberalization and computes the optimal tariff structure for Costa Rica in the presence of trade-policy-induced international capital flows and foreign capital taxation. For this, an applied general equilibrium model integrating trade, capital flows and international capital income taxation is used. The model has been calibrated to a 1990-91 data set for the economies of Costa Rica and a group of OECD countries. In the model, foreign capital income is taxed by host countries and the tax-credit system operates in foreign investors home countries. Results for Costa Rica show that complete trade liberalization ends up being welfare-reducing, as it leads to an outflow of capital and loss of tax revenue which more than offset the efficiency gains from an enhanced resource allocation. The optimal tariff structure for the Costa Rican economy turns out to be a mixture of import tariffs and subsidies, though of a relatively small l...
This paper reports on research that uses computational techniques to assess whether or not variou... more This paper reports on research that uses computational techniques to assess whether or not various propositions that have been advanced as plausible in the literature on the theory of customs unions actually hold. This research blends theory and numerical simulation to get insights into the likelihood that various theoretical propositions prposed in the customs union literature hold. JEL classification codes F10, F13, F15
This paper uses computational techniques to assess whether or not var-ious propositions that have... more This paper uses computational techniques to assess whether or not var-ious propositions that have been advanced as plausible in the literature on regional trade agreements may actually hold. The idea is to make proba-bilistic statements as to whether propositions of interest might hold, rather than to restrict assumptions so they unambiguously hold. Our aim is to blend theory and numerical simulation and go beyond the ambiguous ana-lytically derived propositions that dominate the theoretical literature so as to assess the likelihood of propositions holding for particular model speci…-cations. JEL classi…cation codes F10, F13, F15
This paper explores the use of structural models as an alternative to reduced form methods when d... more This paper explores the use of structural models as an alternative to reduced form methods when decomposing observed joint trade and technology driven wage changes into components attributable to each source. Conventional mobile factors Heckscher-Ohlin models typically reveal problems of specialisation unless price changes accompanying trade shocks are small, and can also produce wide ranges for the decomposition for parameterisations consistent with the joint change. A differentiated goods model which generalises Heckscher-Ohlin removes problems of specialisation and concentrates the range of decompositions more narrowly, but introduces larger demand side responses to trade shocks which greatly reduce the effect of trade. The conclusion offered is that the choice of structural model matters for decomposing observed wage changes into trade and technology components, and that reduced-form methods which do not discriminate between alternative structural models may not be that informat...
This paper explores the use of structural models as an alternative to reduced form methods when d... more This paper explores the use of structural models as an alternative to reduced form methods when decomposing observed joint trade and technology driven wage changes into components attributable to each source. Conventional mobile factors Heckscher-Ohlin models typically reveal problems of specialisation unless price changes accompanying trade shocks are small, and can also produce wide ranges for the decomposition for parameterisations consistent with the joint change. A differentiated goods model which generalises Heckscher-Ohlin removes problems of specialisation and concentrates the range of decompositions more narrowly, but introduces larger demand side responses to trade shocks which greatly reduce the effect of trade. The conclusion offered is that the choice of structural model matters for decomposing observed wage changes into trade and technology components, and that reduced-form methods which do not discriminate between alternative structural models may not be that informat...
This paper discusses the reasonableness of assumptions used in theoretical trade models, noting t... more This paper discusses the reasonableness of assumptions used in theoretical trade models, noting that it is common in theoretical literature to make the assumption that in a multi-country, multi-good world, the direction of trade (import and export by commodity) is predetermined and fixed for each good for each country. Comparative static exercises with such models, such as the analysis of alternative regional trade agreements (customs unions, for instance) are typically assumed to leave the direction of trade in each good unchanged for each country. Here, we both provide computational evidence as to the reasonableness of this assumption and an indication as to how the reasonableness of assumptions used elsewhere may be gauged. We consider a simple three-country, threegood, pure-exchange model with CES preferences. We compute free trade competitive equilibria, three-country non-cooperative Nash equilibria, and customs union equilibria for randomized parameterizations, and find that t...
This thesis uses general-equilibrium numerical-simulation techniques to analyse trade and environ... more This thesis uses general-equilibrium numerical-simulation techniques to analyse trade and environmental issues. It tries to take applied general equilibrium modelling in these areas beyond their traditional confines in a number of ways. These include endogenous incorporation of international capital flows into trade models, decomposition of observed economic outcomes, and computation of bargaining solutions and non-cooperative equilibria. Chapter 1 analyses the welfare, income distribution and macroeconomic implications of trade liberalisation and increased indirect taxation in El Salvador. It is found that these policies have little effect on welfare and income distribution, but a significant impact on macroeconomic aggregates. Chapter 2 examines trade liberalisation when foreign direct investment (FDI) flows and international capital income taxation are present, using data for Costa Rica. The main finding is that, once FDI flows and its taxation are taken into consideration, trade...
Coase’s seminal 1960 paper on externalities is associated with the so-called Coase Theorem which ... more Coase’s seminal 1960 paper on externalities is associated with the so-called Coase Theorem which is stated in the literature in many forms. However, its main thrust was less to state a theorem than to challenge Pigou’s earlier insistence on the need for government intervention through Pigouvian taxes to achieve internalisation of externalities. Coase argued instead that private party bargaining can be relied upon to internalise externalities, but equally insisted that establishing clear and firm property rights is a precondition to successful internalisation achieving bargaining. Similar thinking has lead to clear definitions of property rights becoming a key part of World Bank conditionality in the environmental area. This paper discusses the underpinnings of this position, arguing that it is little researched and subject to challenge. We first show how Coase only considered one type of property right, and where others such as compensation rights are allowed for the property right ...
This paper analyses debt relief efforts by creditors to alleviate the debt burden of lowincome co... more This paper analyses debt relief efforts by creditors to alleviate the debt burden of lowincome countries. The Heavily Indebted Poor Countries (HIPC) Initiative builds on traditional debt relief, and for the first time involves relief on multilateral debt. It seeks to reduce debt to sustainable levels and eliminate any debt overhang that might hinder growth and investment. It provides substantial debt relief to eligible countries by reducing their overall debt stocks by about one-half, or, together with traditional relief over time, by some 80 per cent. It lowers debt service payments of HIPCs substantially, provides room for increased social spending, and provides a solid basis for debt sustainability. The latter requires efforts by both debtors and creditors. To find poverty reduction efforts, HIPC relief is important, but much broader international support is needed as external transfers to HIPCs in the past far exceeded debt service paid. Experience has shown that external suppor...
In this paper we investigate the powerful implications of the Stolper-Samuelson theorem, which us... more In this paper we investigate the powerful implications of the Stolper-Samuelson theorem, which uses the Heckscher-Ohlin model to predict strong links between changing trade prices and wage inequalities. We summarise recent work, which shows that these theoretical links are, in fact, far stronger than indicated by empirical evidence or simplified reduced-form regressions. We point out that the literature outlines many reasons to doubt the validity of the Heckscher-Ohlin model, and summarise various general equilibrium studies of advanced countries which indicate that relaxation of the assumptions of the Heckscher-Ohlin model can greatly undermine the Stolper-Samuelson conclusions. We conclude that, while increased trade with developing countries has probably played some part in the widening wage inequalities in the UK and USA, there is considerable doubt over how large this role is. There are good reasons for believing that, contrary to the usual conclusions of the Stolper-Samuelson ...
SSRN Electronic Journal
In March 2018, representatives of member countries of the African Union signed the African Contin... more In March 2018, representatives of member countries of the African Union signed the African Continental Free Trade Area (AfCFTA) agreement. This agreement provides a framework for trade liberalization in goods and services and is expected to eventually cover all African countries. Using a multi-country, multi-sector general equilibrium model based on Costinot and Rodriguez-Clare (2014), we estimate the welfare effects of the AfCFTA for 45 countries in Africa. Three different model specifications—comprising both perfect competition and monopolistic competition—are used. Simulations include full elimination of import tariffs and partial but substantial reduction in non-tariff barriers (NTBs). Results reveal significant potential welfare gains from trade liberalization in Africa. As intra-regional import tariffs in the continent are already low, the bulk of these gains come from lowering NTBs. Overall gains for the continent are broadly similar under the three model specifications used, with considerable variation of potential welfare gains across countries in all model structures.