Appended Note 3-9 GTAP Model
- Japanese version
- English version
1. GTAP Model
Trade liberalization causes the relative price of traded goods to fluctuate. As a result, production factors of trading countries such as capital and labor force, etc. are considered to move from low productivity to high productivity. The economic model that analyzes the ripple effects arising from such market mechanisms is the general equilibrium model.
The Global Trade Analysis Project (GTAP) model is one of the applied general equilibrium models developed by the Center for Global Trade Analysis, which was established in 1992 by a group led by Professor Hertel of Purdue University in the United States, in order to evaluate the impact of international trade on world economies. By treating trade liberalization, a policy change with global impact, as an exogenous shock, GTAP can be used to quantitatively evaluate its impact on industrial structure, allocation of resources, income distribution, etc. by taking into account the relative price fluctuations and how economic entities change their actions based on such fluctuations. Regarding production factors, in this case, while their distribution among industries is determined endogenously based on the optimal behavior of each economic entity, the total number of production factors as a whole is determined exogenously.
In addition to the formulas used by the model, the complete dataset is provided to the users in the GTAP model (GTAP 5.0, 1997 data was used).
For further details regarding the model, see Kawasaki (1999) and the GTAP model website (http://www.gtap.agecon.purdue.edu/). For calculation examples, see Kawasaki (2003), Itakura, Hertel & Reimer (2003), Tsutsumi and Kiyota (2002), etc.
2. Assumptions, etc. for the simulation
(1) Regional and industrial classifications
Regional classification
As economic partnerships in the Asian region are assumed in this analysis, regions are classified into: Japan, China, ROK, ASEAN (including Singapore, Malaysia, Thailand, Philippines, Indonesia, Vietnam) and Other. Other consists of Taiwan, Hong Kong, South Asia, Australia, New Zealand, US, Canada, Mexico, Peru, Chile, South America, EU (the 15 countries that were members as of April 2004), Russia, etc.
Industrial classification
Industries are classified into: agricultural, forestry and fisheries industry; mining industry; textiles and clothing; leather; pulp and paper; printing and publishing; metals; chemicals; transportation machinery; machinery and facilities; other manufacturing; electricity; gas; water; construction; trade and transportation; other services, etc.
(2) Production Factors
Production factors were divided into three factors: land, capital and labor force. While the standard GTAP model treats natural resources as a factor of production, they are grouped with capital in this model. In addition, labor force quality such as skilled vs. unskilled labor was not taken into consideration.
(3) Simulation characteristics
In this analysis, calculations are based on a standard GTAP model case that only considers static effects. As such, dynamic effects from capital accumulation, etc. and effects from international capital flows were not considered.
Considering how (1) this analysis aims to come up with a rough guideline concerning economic effects from tariff reductions, and how (2) changes in the assumptions via factoring in of dynamic effects, etc. for the model would alter the calculation results, figures need to be broadly interpreted.