Trade policy

University Paris 1 Panthéon-Sorbonne

Paris School of Economics

Master 2 ETE, Empirical and Theoretical Economics

2015-2016 2nd semester, 18h

Instructor: Christophe Gouel (INRA and CEPII, , http://www.christophegouel.com)

Descriptions

This course covers the theory of trade policy and the assessment of their consequences using applied simulation models (partial and general equilibrium). Students will be introduced to simulation methods that can be used as companion to theory or to engage in the policy debate over trade policies.

Contents

  1. The formation of trade policy
  2. Trade policy in partial equilibrium
  3. Introduction to applied general equilibrium
  4. The effects of trade policy under the Armington assumption
  5. Trade, welfare and industrial organization
  6. Measuring trade policy

Grading

The course grade will be determined by the participation to hands-on problems in class (1/4) and by home assignments based on a work to be done by group of 2 to 3 students (4/5). The work will consist in applying the tools learned during the course to answer simple questions of applied trade policy.

GAMS installation

This course involves exercises of simulations using computers. Students have to bring their own laptop (one for two persons is enough) and have to install the software GAMS, which is free for models of small size such as the ones presented during the course.

You can download GAMS on the website http://www.gams.com/. You will also find on GAMS website the software documentation and many model examples.

The installation under Windows is standard and does not present any difficulty.

Linux and Mac OS X

For the users of UNIX-based operating systems (Linux and Mac), GAMS works in these environments, but without user interface. One has to work in a terminal, with a text editor. For a better user experience, it is better to install a Windows emulator (Wine). For this approach, you will find the instructions on the following sites:

Since GAMSIDE under Wine is not very stable, you may also install Atom (https://atom.io/) to edit GAMS files. Within Atom, you should install the following packages: language-gams to enable syntax highlighting of GAMS files and terminal-plus to be able to launch a terminal and so GAMS inside Atom.

References

Textbooks on trade policy

Textbooks on applied modeling

New quantitative trade models

1. The formation of trade policy

Taxing trade for tax revenue

Welfare maximizing trade policy

The political economy of trade protection

2. Trade policy in partial equilibrium

Numerical methods

3. Introduction to applied general equilibrium

Calibration

Social Accounting matrices

Functional forms

4. The effects of trade policy under the Armington assumption

5. Trade, welfare and industrial organization

6. Measuring trade policy

GAMS modeling

Data

List of GAMS examples

  1. One-sector partial equilibrium model of trade - PartialEq.gms
  2. Two-sector partial equilibrium model of trade - PartialEqSets.gms
  3. Optimal tariff with the one-sector partial equilibrium model - (PartialEqNLP.gms,PartialEqOptimal.gms)
  4. GE example: 1 sector - 2 factors - 1 household - GE1x2x1.gms
  5. GE example: 1-2-3 model - GE-1-2-3.gms
  6. GE example: 1-2-3 model with multiple sectors - GE-1-2-3-Multiple-sectors.gms
  7. GE example: 1-2-3 model with taxes - GE-1-2-3-Taxes.gms
  8. GE example: Multi-country Armington model - GE-Multi-Armington.gms
  9. GE example: Multi-country Krugman model - GE-Multi-Krugman.gms
  10. GE example: Multi-country Melitz model - GE-Multi-Melitz.gms