Enriching U.S. labor results in a multi-regional CGE model (original) (raw)
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Trade and Skilled-Unskilled Wage Gap in a Model with Differentiated Goods
2002
There is a continuing debate about whether international trade is responsible for the observed skilled-unskilled wage gap. In this paper we present a general equilibrium trade model with differentiated goods. We begin with an analytical model and show how changes in relative factor returns can be decomposed into changes in commodity prices, changes in the trade balance, and changes in the factor endowment Then we use a computable general equilibrium (CGE) trade model calibrated to the U.S. economy in 1982 to analyze the effects of these shocks, as well as technology changes, observed in the U.S. in the 1980's.
The 45 region × 50 commodity × 5 primary factor version of the Global Trade Analysis Project's [GTAP] database provides us with the splits of total labor payments into skilled and unskilled labor-presupposing substitution possibilities between them. Given the skilled labor payment shares of the GTAP database, we offer an ex post rationalization within a production-theoretic framework. This relies on inter-regional covariation in the GTAP shares and in measures of educational attainment. Adoption of a suitable nesting of skilled-unskilled labor in GTAP's production function enables us to derive a 'reasonable' value for the (implicit) substitution elasticity between skilled-unskilled labors.
Disaggregating Labor Payments by Skill Level in GTAP
GTAP Technical Paper Series
This paper outlines an approach to disaggregating labor payments in the GTAP, global economic data base. The split between low- and high-skilled labor is based on occupational data. High-skilled labor is assumed to consist of managers, administrators, professionals, and para-professionals. Data are gathered on this occupational split, by sector, in fifteen different economies, and these are mapped to GTAP sectors. Regression analysis shows a systematic relationship between GDP per capita and the national stock of tertiary and secondary educated labor on the one hand, and the sectoral labor payments split on the other. This model is used to predict labor splits, by sector, in the remaining GTAP regions. The results are evaluated in terms of the implied economywide skilled -unskilled labor payment ratio. Overall, the results seem promising enough to warrant inclusion in the GTAP, version 4 data base.
The Labour Market in CGE Models
SSRN Electronic Journal, 2000
enthält eine Bestandsaufnahme von Modellierungsoptionen für den Arbeitsmarkt im Rahmen einer numerischen allgemeinen Gleichgewichtsanalyse (CGE). Wir strukturieren diese Bestandsaufnahme in drei große Teile: Arbeitsangebot, Arbeitsnachfrage und Arbeitsmarktkoordination. Auf der Arbeitsangebotsseite lauten die beiden prinzipiellen Modellierungsoptionen: aggregierte, representative Haushalte und Mikrosimulation auf der Basis von Individualdaten. Im Rahmen einer CGE-Analyse hat Mikrosimulation eine Reihe von Vorteilen (direkter Bezug zu empirischen Arbeitsangebotsschätzungen, Explizitheit in Verteilungsfragen) und vermeidet Probleme, die typischerweise bei der Bestimmung der Eigenschaften aggregierter Haushalte auftreten. Wir sehen sie deshalb als das für viele Arbeitsmarktfragestellungen gebotene Instrument an. Auf der Arbeitsnachfrageseite ist das im Rahmen einer CGE-Analyse kritische Element die Substituierbarkeit von verschiedenen Typen Arbeit. Die Arbeitsangebotsanalyse legt eine große Zahl möglicher Arbeitsklassifikationen nahe. Nur für die wenigsten davon gibt es eine empirisch gesicherte Basis für die Nachfragebedingungen. In unseren Augen sollte der Ausgangspunkt einer Nachfragemodellierung immer vollständige Substituierbarkeit (Effizienzgewichtete Addition unterschiedlicher Typen Arbeit) sein, es sei denn es gibt empirische Belege dafür, dass die relativen Preise auf ein Auseinanderlaufen des Angebots systematisch reagieren. Bei der Modellierung der Arbeitsmarktkoordination sehen wir uns einem Dilemma gegenüber. Idealerweise würden wir ein theoretisch fundiertes, strukturelles Modell unfreiwilliger Arbeitslosigkeit verwenden, das hinreichend freie Parameter enthält, so dass es auf empirische Lohnelastizitäten kalibriert werden kann. Dieses Ideal ist bislang in der Modellierung nicht erreicht. Einfachen strukturelle Modellen fehlt es an der Flexibilität der empirischen Anpassung, während das direkte Arbeiten mit empirischen Elastiziäten die ökonomische Interpretation von Löhnänderungen als Resultat von Veränderungen der Umgebungsvariablen erschwert.
Creating a Disaggregated CGE Model for Trade Policy Analysis: GTAP-MVH
Foreign Trade Review, 2020
Thousands of economists spread across almost every country use the GTAP model to analyse trade policies including trade wars and trade agreements. GTAP has an impressive regional coverage (140 countries), but the standard commodity coverage (57 commodities/industries) can cause frustration when tariffs on narrowly defined products are being negotiated. This article sets out a method for disaggregating commodities/industries in computable general equilibrium models such as GTAP and applies it to GTAP’s motor vehicle sector. The method makes use of readily available highly disaggregated trade data supplemented by detailed input–output data where available and data from a variety of other sources such as commercial market reports. JEL Codes: C68, F13, F14, F17
Economic Modelling, 2010
Computable General Equilibrium (CGE) models are now routinely utilized for the evaluation of trade policy reforms, yet they are typically quite highly aggregated, which limits their usefulness to trade negotiators who are often interested in impacts at the tariff line. On the other hand, Partial Equilibrium (PE) models, which are typically used for analysis at disaggregate levels, deprive the researcher of the benefits of an economy-wide analysis, which is required to examine the overall impact of broad-based trade policy reforms. Therefore, a PE-GE, nested modeling framework has the prospect of offering an ideal tool for trade policy analysis. In this paper, we develop a PE model that captures international trade, domestic consumption and output, using Constant Elasticity of Transformation (CET) and Constant Elasticity of Substitution (CES) structures, market clearing conditions and price linkages, nested within the standard GTAP Model. In particular, we extend the welfare decomposition of to this PE-GE model in order to contrast the sources of welfare gain in PE and GE analyses. To illustrate the usefulness of this model, we examine the contentious issue of tariff liberalization in the Indian auto sector, using PE, GE and PE-GE models. Both the PE and PE-GE models show that the imports of Motorcycles and Automobiles change drastically with both unilateral and bilateral tariff liberalization by India, but the PE model does a poor job predicting the overall size and price level in the industry, post-liberalization. On the other hand, the GE model overestimates substitution between regional suppliers due to "false competition" and underestimates the welfare gain, due to the problem of tariff averaging in the aggregated model. These findings are shown to be robust to wide variation in model parameters. We conclude that the linked model is superior to both the GE and PE counterparts. JEL Codes: C68, F13, F14, F17, O53.
Papers in Regional Science, 2007
We use a 500-industry CGE model of the U.S. to simulate the macro, industry and state effects of removing major U.S. tariffs and quotas. We find that this would generate a welfare gain of 0.07 per cent. For most industries, the output change would be negligible but for sugar, butter and several textile industries output contractions would be large. The state employment changes are all between -0.5 and 0.2 per cent. We explain the results by elementary mechanisms, in a way that does not require prior knowledge of the underlying CGE model. Liew, L.H. (1984), " 'Tops-down' versus 'bottoms-up' approaches to regional modeling,"
Calibrating the Employment Effects of Trade
Review of International Economics, 1998
The one-sector model of monopolistic competition and intraindustry trade is merged with the Shapiro-Stiglitz model of efficiency wages to show that introducing trade increases employment in both countries. The intuition is that even when employment is held constant, trade improves worker welfare via increased variety of available goods. The increase in worker welfare relaxes the efficiency wage constraint, permitting an increase in employment. The increase in employment magnifies the benefits of trade. The model is calibrated to US data to estimate the employment effects of eliminating all trade and eliminating trade with Mexico and Canada.
Skilled-Unskilled Wage Inequality and Urban Unemployment
Economic Inquiry, 2010
The impact of trade liberalization on the labor market in the North has drawn tremendous attention in the face of the growing skilled-unskilled wage gap but in the South it has been somewhat neglected. One of the key structural differences between the North and the South is that the South experiences a pronounced rural-urban migration in the presence of urban unemployment. We introduce this feature in the structure of a simple general equilibrium model to analyze the effects of trade liberalization and fragmentation on employment and the skilled-unskilled wage differential in the South. In particular, we show that while fragmentation necessarily improves the unskilled wage and the skilled wage, more lucrative global opportunities for the skilled final product, in the absence of fragmentation, can reduce the rural wage and increase urban unemployment. The effect of fragmentation, ceteris paribus, on the skilled-unskilled wage gap is sensitive to the degree of substitutability between land and unskilled labor. As such, fragmentation can magnify the increase in the skilled-unskilled wage gap resulting from an improvement in the terms of trade. It is also shown that a technological progress in the intermediate goods sector increases the skilled-unskilled wage gap and raises urban unemployment. (JEL F1, O1, F11, F12) *We wish to thank anonymous referee(s) for insightful comments and suggestions on an earlier version of this paper. The usual disclaimer applies.