Lisandro Abrego

The Choice of Structural Model in Trade-Wages Decompositions

This paper uses a calibrated general equilibrium model to decompose observed wage changes from trade and technology shocks into portions attributable to each source. It highlights some difficulties with the numerical performance of widely used theoretical trade structures. For small economies, the Heckscher-Ohlin model reveals specialization problems unless the price changes accompanying trade shocks are small. It can also yield strikingly different decompositions of the same wage change. A differentiated-goods model removes specialization problems and accommodates large price changes, but introduces demand-side responses greatly reducing the effect of trade on wages, and performs implausibly with sector-biased technical change. Copyright 2000 by Blackwell Publishing Ltd.

External Linkages and Economic Growth in Colombia: Insights from a Bayesian VAR Model

This paper investigates the sensitivity of Colombian GDP growth to the surrounding macroeconomic environment. We estimate a Bayesian VAR model with informative steady-state priors for the Colombian economy using quarterly data from 1995 to 2007. A variance decomposition shows that world GDP growth and government spending are the most important factors, explaining roughly 17 and 16 per cent of the variance in Colombian GDP growth respectively. The model, which is shown to forecast well out-of-sample, can also be used to analyse alternative scenarios. Generating both endogenous and conditional forecasts, we show that the impact on Colombian GDP growth of a substantial downturn in world GDP growth would be non-negligible but that the decline still would be mild by historical standards.

How Reasonable are Assumptions Used in Theoretical Models? Computational Evidence on the Likelihood of Trade Pattern Changes

In theoretical literature it is common 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. We consider a simple three-country, three-good, pure-exchange model with CES preferences. We compute free trade competitive equilibria, three-country non-cooperative Nash equilibria, and customs union equilibria for randomised parameterizations, and find that trade pattern changes between free trade and customs union equilibria in around 35% of cases.

Free-riding, carbon treaties, and trade wars: the role of domestic environmental policies

This paper uses a calibrated general-equilibrium model of North-South trade with carbon emissions to explore the strategic, open-economy implications of price and quantity based instruments for CO2 emission reduction. We compute non-cooperative environmental and trade policy equilibria and Nash bargaining outcomes in environmental policies with side payments of cash. Results show that quotas can lead to higher internalization levels in a non-cooperative zero-tariff equilibrium in comparison with emission fees. If tariffs are also chosen non-cooperatively, the form of policy instrument used affects equilibrium tariffs, with quotas leading to lower trade barriers, particularly under a regional carbon treaty.

Trade Liberalization in the Presence of Foreign Direct Investment and Tax Credits: Estimates for Costa Rica

The paper uses a calibrated general-equilibrium model to quantify the welfare impact of trade liberalization-and compute the optimal tariff structure-for Costa Rica when trade-policy-induced foreign direct investment and international capital taxation with credits are present. It shows that complete trade liberalization reduces Costa Ricas welfare, 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 relatively small import tariffs and subsidies. Copyright Blackwell Publishing Ltd 2003.

El Salvador: general equilibrium analysis of structural adjustment reform

Abstract For the past 10 years, carrying out structural adjustment reforms in El Salvador has implied important changes in this country’s economic policy. These changes, which encompass price control policies, exchange rate policies, commercial, tax, and financial reforms as well as privatization, have affected practically every aspect of the Salvadoran economy. In this paper, we concentrate on analyzing three structural adjustment areas in the country: trade liberalization, exchange rate policy and public finances. A computable general equilibrium (CGE) model calibrated with 1990 data is used. There is a brief description of relevant aspects of structural adjustment reforms in El Salvador with special attention to the trade liberalization process. The structure of the CGE used is outlined together with the nature of the data. The last part of the paper presents the results of our simulations and draws some conclusions.

Trade Liberalization and Foreign Direct Investment: An Applied General Equilibrium Model for Costa Rica

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 level.