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Computational Analysis of the Accession of Chile to the NAFTA and Western Hemisphere Integration
Author(s) -
Brown Drusilla K.,
Deardorff Alan V.,
Stern Robert M.
Publication year - 2000
Publication title -
world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/1467-9701.00266
Subject(s) - stern , schools of economic thought , citation , public good , political science , economics , sociology , library science , law , history , computer science , neoclassical economics , ancient history
We present the results based on the Michigan computational general equilibrium model of Western Hemisphere economic integration. It is shown that tariff elimination will have beneficial effects for most countries involved, although the benefits as well as the costs of liberalizatio n are small. However, if a hemispheric treaty were to stimulate an increase in the capital stocks of the major South American economies, the welfare gains would be substantial. Sensitivity tests reveal that the model exaggerates the likely gains from economies of scale due to liberalization. But the error is small in this context because the impact of trade liberalization is small. When econometric estimates of scale economies are incorporated into the model, the welfare gains due to capital flows nevertheless remain robust. A comparison of results for Chile using different databases indicates that the impact of regional liberalization using a 1980 database may overstate the impact on the nonferrous metals sector in particular and manufacturing more generally. Nonetheless, when using a 1990 database, the change in output of the nonferrous metals sector remain larger than for any other sectors in the Chilean economy.