The role of global agricultural market integration in multiregional economic modeling: Using hindcast experiments to validate an Armington model
Abstract
The representations of international trade and global market integration play central roles in long-term global agricultural economic modeling. However, the conventional use of the gravity models (i.e., the Armington approach) of trade may not adequately account for the dynamic process of market integration. In this paper, we generalize a logit-based Armington approach by permitting home preference bias erosion to account for a trend of global market integration. We build a simple agricultural economic equilibrium model and conduct hindcast experiments to examine the historical trend of market integration. The results show a significant integrating trend of the global agricultural market implied by converging Armington preference distributions (i.e., home bias erosion) in 1995 – 2015, with a half-life of 45 years. We demonstrate important implications of allowing the dynamic trend of market integration implied by bias erosion on estimating trade elasticities. By testing the future market integration trend implied by historical home bias integration in GCAM, we show a high sensitivity of long-term agroeconomic projections to future trade and market integration scenarios.
- Authors:
- Publication Date:
- Research Org.:
- Pacific Northwest National Lab. (PNNL), Richland, WA (United States)
- Sponsoring Org.:
- USDOE Office of Science (SC)
- OSTI Identifier:
- 1819207
- Alternate Identifier(s):
- OSTI ID: 1815077; OSTI ID: 1819949
- Report Number(s):
- PNNL-SA-158709
Journal ID: ISSN 0313-5926; S0313592621000990; PII: S0313592621000990
- Grant/Contract Number:
- AC05-76RL01830
- Resource Type:
- Published Article
- Journal Name:
- Economic Analysis and Policy
- Additional Journal Information:
- Journal Name: Economic Analysis and Policy Journal Volume: 72 Journal Issue: C; Journal ID: ISSN 0313-5926
- Publisher:
- Elsevier
- Country of Publication:
- Australia
- Language:
- English
- Subject:
- 54 ENVIRONMENTAL SCIENCES; 29 ENERGY PLANNING, POLICY, AND ECONOMY; hindcast validation; home bias erosion; market integration; Armington; agricultural trade
Citation Formats
Zhao, Xin, Calvin, Katherine V., Wise, Marshall A., and Iyer, Gokul. The role of global agricultural market integration in multiregional economic modeling: Using hindcast experiments to validate an Armington model. Australia: N. p., 2021.
Web. doi:10.1016/j.eap.2021.07.007.
Zhao, Xin, Calvin, Katherine V., Wise, Marshall A., & Iyer, Gokul. The role of global agricultural market integration in multiregional economic modeling: Using hindcast experiments to validate an Armington model. Australia. https://doi.org/10.1016/j.eap.2021.07.007
Zhao, Xin, Calvin, Katherine V., Wise, Marshall A., and Iyer, Gokul. Wed .
"The role of global agricultural market integration in multiregional economic modeling: Using hindcast experiments to validate an Armington model". Australia. https://doi.org/10.1016/j.eap.2021.07.007.
@article{osti_1819207,
title = {The role of global agricultural market integration in multiregional economic modeling: Using hindcast experiments to validate an Armington model},
author = {Zhao, Xin and Calvin, Katherine V. and Wise, Marshall A. and Iyer, Gokul},
abstractNote = {The representations of international trade and global market integration play central roles in long-term global agricultural economic modeling. However, the conventional use of the gravity models (i.e., the Armington approach) of trade may not adequately account for the dynamic process of market integration. In this paper, we generalize a logit-based Armington approach by permitting home preference bias erosion to account for a trend of global market integration. We build a simple agricultural economic equilibrium model and conduct hindcast experiments to examine the historical trend of market integration. The results show a significant integrating trend of the global agricultural market implied by converging Armington preference distributions (i.e., home bias erosion) in 1995 – 2015, with a half-life of 45 years. We demonstrate important implications of allowing the dynamic trend of market integration implied by bias erosion on estimating trade elasticities. By testing the future market integration trend implied by historical home bias integration in GCAM, we show a high sensitivity of long-term agroeconomic projections to future trade and market integration scenarios.},
doi = {10.1016/j.eap.2021.07.007},
journal = {Economic Analysis and Policy},
number = C,
volume = 72,
place = {Australia},
year = {Wed Dec 01 00:00:00 EST 2021},
month = {Wed Dec 01 00:00:00 EST 2021}
}
https://doi.org/10.1016/j.eap.2021.07.007
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