Tariffs and transportation costs are introduced and are differentiated among each pair of partner and for each product.
Tariffs come from the MAcMap database which includes exhaustive information on the level of applied trade barriers across the world.
Transportation costs have been computed based on the distance between each pair of regions and the transportability of the good (Hummels, 2001)1.
The applied calibration method which ensures consistency between trade flows, net trade, trade costs and prices, and avoids large discrepancies between observed and computed trade flows is adapted from Jansson and Heckelei (2009)2.
The market is represented by implicit product supply functions based on detailed, geographically explicit, Leontief production functions, and through explicit, mostly constant elasticity, product demand functions. The market equilibrium is found through maximization of the sum of producer and consumer surplus subject to resource, technological and political constraints (McCarl and Spreen,1980)3.
1 Hummels, D. (2001). Toward a Geography of Trade Costs. GTAP Working Paper No. 17. [download]
2 Jansson, T. and Heckelei, T. (2009). A new estimator for trade costs and its small sample properties. Economic Modelling 26: 489-498. [download]
3 McCarl, B. A. and Spreen, T. H. (1980). Price Endogenous Mathematical Programming as a Tool for Sector Analysis. American Journal of Agricultural Economics 62: 87-102. [download]
Last edited: 07 March 2012
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