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The Effect of Aggregation Bias: An NTB ‐modelling Analysis of Turkey's Agro‐food Trade with the EU
Author(s) -
Bektasoglu Beyhan,
Engelbert Tanja,
Brockmeier Martina
Publication year - 2017
Publication title -
the 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/twec.12444
Subject(s) - economics , european union , econometrics , welfare , estimation , tariff , computable general equilibrium , data aggregator , agricultural economics , international economics , microeconomics , computer science , market economy , management , computer network , wireless sensor network
We explore how different data aggregation levels affect the gravity estimates of non‐tariff barriers ( NTB s) in the agro‐food sector, and we examine their related impacts on policy simulations of an expansion to the European Union ( EU ) that would include Turkey. We calculate two sets of ad valorem equivalents ( AVE s) of NTB s using the gravity approach to disaggregated and aggregated Central Product Classification data for 15 Global Trade Analysis Project ( GTAP ) agro‐food sectors. We find that the AVE s of NTB s vary substantially across products and that using aggregated data primarily results in greater effects of NTB s. In a second step, we incorporate the AVE s of NTB s into the GTAP model to evaluate Turkey's EU membership and conclude that aggregation bias has considerable effects on both the estimation of NTB s and the general equilibrium simulation results. Utilising different data aggregation levels leads to a great variability of trade costs of NTB s and, hence, to misleading trade and welfare effects.