Modelling the World Wool Market: A Hybrid Approach

We present a model of the world wool market that merges two modelling traditions: the partialequilibrium commodity-specific approach and the computable general-equilibrium approach. The model captures the multistage nature of the wool production system, and the heterogeneous nature of raw wool, processed wool and wool garments. It also captures the important wool producing and consuming regions of the world. We illustrate the utility of the model by estimating the effects of tariff barriers on wool products using partial- and general-equilibrium solutions. We find that either solution generates similar wool industry results, whereas the macroeconomic effects differ significantly with the partial-equilibrium estimates significantly overestimating the benefits of the tariff changes.general equilibrium, multistage production, partial equilibrium, tariffs, wool products.

Understanding the World Wool Market: Trade, Productivity and Grower Incomes. Part 2: The Toolbox

This is Chapter 2 of my PhD thesis Understanding the World Wool Market: Trade, Productivity and Grower Incomes, UWA, 2006. In this chapter we present the tools used to construct the theoretical structure of the model presented in Chapter 3. The theory of the model is highly nonlinear but is specified in linearised form. In deriving the linearised form of the nonlinear functions, we make explicit the optimising behaviour that underlies the tools and their properties. We use the notational convention of expressing the levels form of a variable in capital letters and the percentage-change equivalent in lower case letters. We also discuss how the tools can be combined by assuming separability between functions.In this chapter we present the tools used to construct the theoretical structure of the model presented in Chapter 3. The theory of the model is highly nonlinear but is specified in linearised form. In deriving the linearised form of the nonlinear functions, we make explicit the optimising behaviour that underlies the tools and their properties. We use the notational convention of expressing the levels form of a variable in capital letters and the percentage-change equivalent in lower case letters. We also discuss how the tools can be combined by assuming separability between functions.

Understanding the World Wool Market: Trade, Productivity and Grower Incomes. Part 1: Introduction

This is the front matter and Chapter 1 of my PhD thesis Understanding the World Wool Market: Trade, Productivity and Grower Incomes, UWA, 2006. The full thesis is available as Discussion Papers 06.19 to 06.24. The core objective of this thesis is summarised by its title: “Understanding the World Wool Market: Trade, Productivity and Grower Incomes”. Thus, we wish to aid understanding of the economic mechanisms by which the world wool market operates. In doing so, we analyse two issues – trade and productivity – and their effect on, inter alia, grower incomes. To achieve the objective, we develop a novel analytical framework, or model. The model combines two long and rich modelling traditions: the partial-equilibrium commodity-specific approach and the computable-general-equilibrium approach. The result is a model that represents the world wool market in detail, tracking the production of greasy wool through five off-farm production stages ending in the production of wool garments.

Providing Duty-Free Access to Australian Markets for Least-Developed COuntries: a General Equilibrium Analysis

The Doha ministerial declaration commits industrialised countries to liberalising access for least-developed countries (LDCs) to their markets. Preferential trade policies have diverse impacts on the initiating country and its trading partners. These effects are of concern to scholars and policy makers. We use Australia as a case study to quantify the direct and indirect effects of providing preferential access to LDC imports entering Australian markets, using a global general equilibrium model of the world economy. LDCs are projected to benefit; Australia is predicted to lose, reflecting the dominance of trade diversion over trade creation effects and adverse terms of trade effects. However, the magnitude of the adverse effect on Australia is small. If one was to view this initiative as an exercise in foreign aid, it suggests that Australia can provide a significant benefit to the poorest nations with which it trades, at almost no cost to itself.economic development, numerical simulation, preferential trading arrangements, trade policy

Distributional Effects of Changes in Australian Infrastructure Industries during the 1990s

During the 1990s, reforms and other developments improved productivity and reduced prices in Australian infrastructure services. These changes raised the average incomes of Australian households. Household incomes increased in every jurisdiction and in every decile of the income distribution. Changes in the electricity and telecommunications industries dominated distributional outcomes. The main sources of changes were productivity improvements and lower real prices. There was a mix of direct price effects, indirect price effects and income effects. Direct price effects - real prices paid by households for most infrastructure services declined. Low income households gained proportionately more from such declines than high income households. Indirect price effects - decreasing infrastructure prices lowered costs for industry and, consequently, output prices fell. This reduced households’ expenditure and the cost of Australia’s exports. Output increased in some industries. This increased the demand for other inputs which, in turn, led to wage increases in some occupations and increased returns to capital. This led to costs and prices rising, and output falling, in some industries. Income effects - wages increased most for occupations that are more heavily represented in high income households. High income households also receive a large proportion of returns to capital, which also increased. Low income households that do not rely on wage incomes were not affected directly by the changes in wages. Overall, the effect on household income distribution was small, slightly favouring more affluent households, because increases in factor incomes (wages and returns to capital) dominated. The views expressed in this paper are those of the staff involved and do not necessarily reflect those of the Productivity Commission.microeconomic reform; economic modelling; utilities; urban transport; telecommunications

Global Gains from Liberalising Trade in Telecommunications and Financial Services

This paper uses a general equilibrium model to assess the effects of liberalising trade in telecommunications and financial services for 19 regions of the world. Results suggest that economies gain from removing barriers to the establishment of new operations (domestic or foreign), and by liberalising the operations of existing operators. For the world as a whole, the one-off gains are estimated to be at least 0.2 per cent of combined GNP, or about US$50 billion.trade in services - telecommunications - finance - financial services - general agreement on trade in services - GATS - trade liberalisation - global

Understanding the World Wool Market: Trade, Productivity and Grower Incomes. Part 3: A Model of the World Wool Market

This is Chapter 3 of my PhD thesis Understanding the World Wool Market: Trade, Productivity and Grower Incomes, UWA, 2006. The full thesis is available as Discussion Papers 06.19 to 06.24. The purpose of this chapter is twofold: first, to present the theoretical structure of the model to be applied in Chapters 5 and 6; second, to derive alternative model closures. This and the next section provide a brief overview of the methodology underlying the theoretical structure of the model.

Understanding the World Wool Market: Trade, Productivity and Grower Incomes. Part 6: The Costs of Global Tariff Barriers on Wool Products; Conclusion

This is Chapters 6 & 7 of my PhD thesis Understanding the World Wool Market: Trade, Productivity and Grower Incomes, UWA, 2006. The full thesis is available as Discussion Papers 06.19 to 06.24. The WOOLGEM model is applied to estimate the distortionary effects on prices, output, trade and regional welfare of wool tariff barriers. The estimates are simulated under long-run conditions where each region faces a trade balance constraint and capital is free to accumulate or depreciate within each region. Our experiments analyse the distortionary effects of tariff barriers from 1997 to 2005, and from 2005 onwards.

Understanding the World Wool Market: Trade, Productivity and Grower Incomes. Part 4: Model Data and Parameters

This is Chapter 4 of my PhD thesis Understanding the World Wool Market: Trade, Productivity and Grower Incomes, UWA, 2006. The full thesis is available as Discussion Papers 06.19 to 06.24. This chapter has three broad aims: (i) to describe the sources and methods used to construct the WOOLGEM database; (ii) to summarise the resulting database to aid in the interpretation of simulation results; and (iii) to describe the sources and rationale underlying the parameters used to calibrate the behavioural equations in the WOOLGEM model.

Armington Parameter Estimation for a Computable General Equilibrium Model: A Database Consistent Approach

Substitution elasticities in policy-oriented computable general equilibrium (CGE) models are key parameters for model results since they determine behaviour in these models. As Dawkins et al. (2001) observe, the current situation with regard to the elasticities available for use in these models is poor. We focus on an important type of elasticity that is widely used in CGE models with international trade: the so-called ‘Armington’ elasticities (Armington, 1969). These elasticities are well known for their critical role in determining model results. We present an alternative approach to quantifying Armington elasticities which is consistent across historical databases. The approach is used to derive elasticities from successive databases of a commonly-used global CGE model, the GTAP model.Armington assumption, computable general equilibrium models, estimating Armington paprmeters