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Mapping Trade to Household Budget Survey: a conversion framework for assessing the distributional impact of trade policies

Author

Listed:
  • Luu, Nhung
  • Woloszko, Nicolas
  • Causa, Orsetta
  • Arriola, Christine
  • van Tongeren, Frank
  • Johansson, Asa
Abstract
The question of whether the gains from trade are equally distributed within countries is subject to a lively debate. In order to analyse the distributional effects of trade policy, this paper develops a novel framework to link the OECD's CGE trade model, METRO, with consumption expenditure data from household budget surveys. This allows for examining the effect of a wide range of trade policy scenarios on different household consumption baskets, and for estimating the exposure of different socio-economic groups, such as income groups, to trade-driven changes in the relative prices of consumption items. The objective of this paper is to describe a methodology to produce a concordance and transition matrix linking GTAP sectors to household survey classifications (COICOP specifically). The methodology is two-fold. First, a cross-walk to establish a [0,1] concordance table between COICOP and GTAP classifications is produced. This is achieved by linking together multiple correspondence tables between COICOP and a number of different product classifications. Second, a transition matrix to convert changes in the prices of GTAP categories to COICOP categories is built. Because there is not always a one-to-one mapping between GTAP and COICOP classifications, the matrix is necessary. The transition matrix gives the extent to which the prices of COICOP items (for example, Meat as opposed to Animal drawn vehicles) change following a given price change of its associated GTAP sector (i.e., cmt-bovine meat). A mapping methodology is an important pre-requisite for investigating research questions concerning the influence of household behaviour changes on trade, as well as trade developments and policy on household welfare. The paper illustrates the mapping of trade policy induced price changes into household expenditures by conducting stylized tariff simulations with METRO and translating those into household expenditures by income decile for selected EU countries.

Suggested Citation

  • Luu, Nhung & Woloszko, Nicolas & Causa, Orsetta & Arriola, Christine & van Tongeren, Frank & Johansson, Asa, 2020. "Mapping Trade to Household Budget Survey: a conversion framework for assessing the distributional impact of trade policies," Conference papers 333153, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:333153
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    References listed on IDEAS

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    1. David H. Autor & David Dorn & Gordon H. Hanson & Jae Song, 2014. "Trade Adjustment: Worker-Level Evidence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(4), pages 1799-1860.
    2. Colin J. Hottman & Ryan Monarch, 2018. "Estimating Unequal Gains across U.S. Consumers with Supplier Trade Data," International Finance Discussion Papers 1220, Board of Governors of the Federal Reserve System (U.S.).
    3. Pablo D. Fajgelbaum & Amit K. Khandelwal, 2016. "Measuring the Unequal Gains from Trade," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(3), pages 1113-1180.
    4. Janos Ferencz, 2019. "The OECD Digital Services Trade Restrictiveness Index," OECD Trade Policy Papers 221, OECD Publishing.
    5. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-326, June.
    6. Olivier Cadot & Julien Gourdon & Frank van Tongeren, 2018. "Estimating Ad Valorem Equivalents of Non-Tariff Measures: Combining Price-Based and Quantity-Based Approaches," OECD Trade Policy Papers 215, OECD Publishing.
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    Cited by:

    1. Hübler, Michael & Wiese, Malin & Braun, Marius & Damster, Johannes, 2024. "The distributional effects of CO2 pricing at home and at the border on German income groups," Resource and Energy Economics, Elsevier, vol. 77(C).
    2. Orsetta Causa & Emilia Soldani & Nhung Luu, 2023. "A cost-of-living squeeze? Distributional implications of rising inflation," Public Sector Economics, Institute of Public Finance, vol. 47(4), pages 431-460.

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    More about this item

    Keywords

    International Relations/Trade; Consumer/Household Economics;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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