Trade liberalization gains under different trade theories: a case study for Ukraine
Zoryana Olekseyuk () and
Edward Balistreri ()
Additional contact information
Zoryana Olekseyuk: Deutsches Institut für Entwicklungspolitik/German Development Institute (DIE)
Empirica, 2018, vol. 45, issue 3, No 4, 507-542
Abstract We analyze the deep and comprehensive free trade area (DCFTA) between Ukraine and the EU using a multi-regional general-equilibrium simulation model. Three alternative trade structures are implemented: (a) a standard specification of perfect competition based on the Armington assumption of regionally differentiated goods; (b) monopolistic competition among symmetric manufacturing firms; and (c) a competitive selection model of heterogeneous manufacturing firms. Across these structures the DCFTA indicates relatively large gains for Ukraine of more than 3 percent. We show, however, that the gains for Ukraine are lower when we consider monopolistic competition in manufacturing. This is attributed to a movement of resources into Ukraine’s traditional export sectors to the EU, which produce under constant returns. While there is little danger of deindustrialization dominating the overall welfare gains, we do observe substantially lower gains when we consider monopolistic competition. To our knowledge, this is the first empirical confirmation of the theoretic predication that the relative gains from trade in monopolistic competition models might be lower than under perfect competition in the context of a numeric simulation of economic integration. Under the popular heterogeneous-firms monopolistic competition theory we find significant firm selection effects indicating welfare impacts for Ukraine that are less than under the Armington structure but above those found under symmetric firms and monopolistic competition. These results are important considerations for Ukraine’s overall development strategy.
Keywords: DCFTA; Ukraine; EU; Armington; New trade theory; Krugman; Melitz (search for similar items in EconPapers)
JEL-codes: F12 C68 O12 O14 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://link.springer.com/10.1007/s10663-017-9371-9 Abstract (text/html)
Access to the full text of the articles in this series is restricted.
Working Paper: Trade liberalization gains under different trade theories: A case study for Ukraine (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:kap:empiri:v:45:y:2018:i:3:d:10.1007_s10663-017-9371-9
Ordering information: This journal article can be ordered from
http://www.springer. ... ration/journal/10663
Access Statistics for this article
Empirica is currently edited by Fritz Breuss and Fritz Breuss
More articles in Empirica from Springer, Austrian Institute for Economic Research, Austrian Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla ().