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

Timothy Kehoe, Jack Rossbach and Kim Ruhl

No 492, Staff Report from Federal Reserve Bank of Minneapolis

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). Using the results of Kehoe and Ruhl (2013) that much of the growth in trade after trade liberalization is in products that are traded very little or not at all, we predict that industries with a higher share of exports generated by least traded products will experience more growth. Using our methodology, we develop predictions for industry-level changes in trade for the United States and Korea following the U.S.-Korea Free Trade Agreement (KORUS). As a test for our methodology, we show that it performs significantly better than the applied general equilibrium models originally used for the policy evaluation of the North American Free Trade Agreement (NAFTA).

Keywords: Trade; North American Free Trade Agreement; Korea (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-for, nep-int and nep-mac
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Using the new products margin to predict the industry-level impact of trade reform (2015)
Working Paper: Using the New Products Margin to Predict the Industry-Level Impact of Trade Reform (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmsr:492

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