Anton C. Yang
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ANTON YANG

Iceberg in GTAP

4/13/2021

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Which one should we see more as iceberg in GTAP from the perspective of a GTAPper? Is that REALLY ams (alternatively seen as a productivity shock; see Walmsley and Minor (2020)) or ptrans (the transport margin)? Ptrans is a variable representing cost index for international transportation which reflects the cost of the input into the transport activity. This index is indirectly impacted by a transportation margin calculated as the CIF price over the custom import value and seems that both natural and artificial components are in it so that the role of distance is left unexplainable. It seems that if we can let the distance explain part of the geographic variations while taking the model to the same data to restate the logic of elasticity of trade costs, we would probably end up bridging the gap with geographic quant literature to some extent.  Alternatively, calibrating rho’s in EK literatures to the aggregate GTAP data and model specification might lead to something similar. This is because that in NQT people do not shock the entire iceberg but only part of it; meanwhile other structural parameters are endogenously impacted by the distance. In the big picture, the intuitions of the two literatures in these frictions are not far-off, but the interpretations, methods/approaches, and applications (especially in the sense of counterfactuals) are different.
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    Anton C. Yang

    Bridging gap between CGE and NQTMs

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