Applied CGE Analysis of Trade Policy

Abstract

In the previous chapter the focus of attention was with the principles and technique of CGE modelling. We turn now to illustrating the potential applications of CGE models in the case of medium- to long-term trade policy analysis in developing countries. There are of course policy applications beyond trade policy—taxation, income distribution, resource depletion, location, employment policies and so on—to which CGE analysis can and has been applied (see for example Devarajan, 1988). Our focus here is by necessity narrower, though it is the case that trade policy has been a central issue in the case of many applications to developing countries. Further, the way in which the foreign trade sector is modelled crucially influences policy simulations outside the foreign trade sector.