CoPS/IMPACT Working Paper Number G-290

Title: GTAP-MVH, A Model for Analysing the Worldwide Effects of Trade Policies in the Motor Vehicle Sector: Theory and Data

Authors: Peter B. Dixon, Maureen Rimmer and Nhi Tran


The Office of the Chief Economist in Global Affairs Canada (hereafter, the Office) is seeking to add to its tools for looking at the effects on Canada and other countries of higher U.S. protection. The Office is particularly interested in the motor vehicle sector. To meet the Office's requirements, we created a version of the GTAP model in which the motor vehicle sector is disaggregated. We call this version GTAP-MVH. This paper describes the process and data inputs though which we constructed a disaggregated motor vehicle sector for GTAP-MVH.

The theory in standard GTAP assumes that capital is completely mobile between industries and that labor markets are characterized by either fixed real wages or completely flexible real wages that adjust to eliminate effects on aggregate employment from policy changes. These capital and labor assumptions limit the usefulness of standard GTAP as a tool for analyzing the short-run impacts of policy changes. We describe theoretical innovations to standard GTAP to enhance its depiction of both capital and labor markets. We also describe innovations in other areas, particularly in the treatments of: the accumulation by each region of foreign assets and liabilities; and the determination of savings, investment and rates of return.

JEL classification: C68; F13; F14; F17

Keywords: GTAP disaggregation; motor vehicle sector; inter-industry capital mobility; foreign assets and liabilities

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