Reference Point Dependence for Specification Bias from Quality Upgrading / Eric Hutton, John Whalley.

Format:

Book

Author/Creator:

Hutton, Eric.

Contributor:

National Bureau of Economic Research.

Whalley, John.

Series:

Working Paper Series (National Bureau of Economic Research) no. w4816.

NBER working paper series no. w4816

Language:

English

Subjects (All):

Competition, International.

Equilibrium (Economics).

Industrial productivity.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1994.

Cambridge, Massachusetts : National Bureau of Economic Research, 1994.

Summary:

This paper argues that whether estimates of the welfare cost of natural or artificial trade barriers that do not discriminate by quality are subject to positive or negative specification bias when using models which do not explicitly recognize quality variation depends on the reference point used in counterfactual equilibrium analysis. We use numerical general equilibrium techniques to generate counter examples to the widely held view that (in the competitive case) incorporating quality upgrading will tend to reduce the welfare costs of quality invariant trade barriers. To do this, we use a trade-distorted equilibrium as the reference point, rather than free trade.

Notes:

Print version record

August 1994.