Using the new products margin to predict the industry-level impact of trade reform

Timothy J. Kehoe, Jack Rossbach, Kim J. Ruhl

Research output: Contribution to journalArticle

5 Scopus citations

Abstract

This paper develops a methodology for predicting the impact of trade liberalization on exports by industry (3-digit ISIC) based on the pre-liberalization distribution of exports by product (5-digit SITC). We evaluate the ability of our methodology to account for the industry-level variation in export growth by using our model to "predict" the growth in industry trade from the North American Free Trade Agreement (NAFTA). We show that our method performs significantly better than the applied general equilibrium models originally used for the policy evaluation of NAFTA. We find that the most important products in our analysis are not the ones with zero pre-liberalization trade, but those with positive, yet small amounts of pre-liberalization trade.

Original languageEnglish (US)
Pages (from-to)289-297
Number of pages9
JournalJournal of International Economics
Volume96
Issue number2
DOIs
StatePublished - Jul 1 2015

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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