Calibrating spatial models of trade

Quirino Paris, Sophie Drogué and Giovanni Anania

Economic Modelling, 2011, vol. 28, issue 6, 2509-2516

Abstract: Empirical spatial models of trade that are based on a mathematical programming specification often exhibit a large discrepancy between the equilibrium solution and the observed demand, supply and levels of trade flows among countries. This discrepancy may be due to several causes. Assuming, however, that a trade model is not misspecified – in the sense that behavior of the economic agents involved in the specific commodity markets has been included in the study and that the relevant policy instruments have been properly taken into account – the cause of discrepancy may be traced either to imprecision of unit transaction costs or to imprecision in the measurement of the demand and supply functions' parameters, or both. Policy assessments based on this type of imprecise models are distorted. This paper presents a methodology for calibrating mathematical programming spatial trade models of increasing complexity, from the one-commodity case to a multi-commodity model with asymmetric slope matrices of demand and supply functions. The proposed calibration procedure identifies corrections of imperfectly measured parameters. The calibrated models generate solutions that exactly reproduce quantities produced and consumed in all countries, as well as trade flows among all pairs of countries, observed in a given base year. Such models may then serve as a springboard for assessing the impact of various policy changes on economic agents in the countries under study.

Keywords: Spatial trade models; Equilibrium solution; Calibration; Positive Mathematical Programming (search for similar items in EconPapers)
JEL-codes: C63 F11 F17 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999311001799
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:28:y:2011:i:6:p:2509-2516

DOI: 10.1016/j.econmod.2011.07.008

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().