Consequently, tA does not entail welfare cost on the Apples market since it does not affect the level of imports. Apples face a tariff tA but demand for apples (DA) is perfectly inelastic. The graphics above illustrates an aggregation bias by considering 2 products (Apples and Oranges) falling into the same product category (Fruits). This also resolves a number of �“aggregation biases.? For example, it allows the study of the effects of the liberalization of “brown rice? imports by Madagascar, a level of aggregation that is neither convenient nor possible in the framework of a general equilibrium model. This can therefore take advantage of the rich WITS datasets which contain all of those.Īnother advantage (which follows directly from the minimal data requirement) is that it permits an analysis at a fairly disaggregated (or detailed) level. In fact, the only required data for the trade flows, the trade policy (tariff), and a couple of behavioral parameters (elasticities). The main advantage of the partial equilibrium approach to Market Access Analysis is its minimal data requirement. The advantages of partial equilibrium modeling In a general equilibrium setup all markets are simultaneously modeled and interact with each other. That is the analysis does not account for the economic interactions between the various markets in a given economy. It also has a number of its disadvantages that the analyst ought to bear in mind.ĭefinitions: partial equilibrium implies that the analysis only considers the effects of a given policy action in the market(s) that are directly affected. While there are many different approaches to market access analysis, adopting the partial equilibrium one has a number of advantages. SMART, the market access simulation package included in WITS, is a partial equilibrium modeling tool. Rationale for Partial Equilibrium modeling You are here: SMART > Presentation > Rationale for Partial Equilibrium modeling
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