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The Welfare Analysis of a Free Trade Zone: Intermediate Goods and the Asian Tigers
Author(s) -
Feltenstein Andrew,
Plassmann Florenz
Publication year - 2008
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/j.1467-9701.2008.01108.x
Subject(s) - economics , welfare , context (archaeology) , international economics , general equilibrium theory , international free trade agreement , free trade , international trade , liberalization , applied general equilibrium , macroeconomics , market economy , geography , archaeology
We analyse trade reform among the ASEAN countries, which recently began removing all mutual trade barriers. The standard method to avoid complete specialisation in traded goods is to distinguish goods both by physical type and place of origin (the so‐called Armington assumption). This methodology is not suitable for the sort of intermediate goods produced by the ASEAN countries. We develop a computational approach in the context of a non‐Armington dynamic general equilibrium model. Analysing the results of a calibrated version of the model, we find that trade liberalisation is generally welfare improving for the ASEAN countries.