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| Author: | Sawyer, W. Ch. Sprinkle, R. L. |
| Title: | Alternative empirical estimates of trade creation and trade diversion: a comparison of the Baldwin-Murray and Verdoorn model |
| Journal: | Weltwirtschaftliches Archiv
1989 : VOL. 125:1, p. 61-73 |
| Index terms: | TARIFFS TRADE ECONOMETRIC MODELS |
| Language: | eng |
| Abstract: | Preferential tariffs have both trade creating and trade diverting effects. To estimate them, two models are used in the literature. The Baldwin-Murray model assumes that the good being traded is a homogeneous product. In the Verdoorn model it is a differentiated product with known elasticity of substitution. The present paper investigates the two models in a unified framework and finds that the two models produce identical trade creation estimates. Trade diversion however will be larger in the Baldwin- Murray formulation if the ratio of non-preferred imports to domestic production is greater than the share of preferred import to total import. |
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