Macroeconomic Potentials of Transatlantic Free Trade: A High Resolution Perspective for Europe and the World

By Gabriel Felbermayr, Benedikt Heid, Mario Larch, Erdal Yalcin. Social Science Research Network, 2015

115 citations recorded by the source corpus.

Critics of the proposed Transatlantic Trade and Investment Partnership (TTIP) dismiss its potential welfare gains as small compared with its risks. We contribute to this debate by investigating the driving forces behind the magnitudes of the estimated welfare gains using the structurally estimated general equilibrium trade model by Egger and Larch (2011) for 173 countries. In our baseline scenario, the TTIP amounts to a reduction of ad valorem trade costs across the Atlantic between 16 and 26 percentage points. We find that the TTIP could yield substantial gains for the EU (3.9%), the United States (4.9%), and the world (+1.6%). While welfare gains are heterogeneous within the EU, the TTIP does not systematically favour richer or more central member states. The majority of third countries would be negatively affected (0.9% on average). We identify as key drivers for the magnitudes of the welfare effects different assumptions about trade cost specifications, about the assumed trade cost reducing potential of the TTIP, about different levels of aggregation, and about the regulatory spill-overs of the TTIP on third countries. Our insights on the drivers for the welfare effects help to understand differences across current evaluations of the TTIP.

Subfields: Economics and Econometrics, Finance, Political Science and International Relations

View Paper: https://www.semanticscholar.org/paper/269ff32674d29e32f905953d80fc83706b8644a7

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Citations in the corpus

On the widely differing effects of free trade agreements: Lessons from twenty years of trade integration (2019, unknown): “2Aichele, Felbermayr and Heiland (2014), Felbermayr et al. (2014), Anderson, Larch and Yotov (2015a), and Carrère, Grujovic and Robert-Nicoud (2015) each use econometric estimates of the average effect of past agreements to model the effects of TTIP (as well as TPP, in the case of Carrère, Grujovic ”
Non-tariff barriers, integration and the transatlantic economy (2015, background): “27 This comment also applies to analyses, like that by Felbermayr et al. (2013), which incorporates equilibrium unemployment.”