International Trade Policy and Quantitative Models : A Practitioner’s Guide

Overview & Synopsis

Quantitative international trade models are essential tools for policy analysis. This paper provides guidance for quantifying and solving trade models for policy simulations using the popular programming languages Python, Julia, Matlab, and R. The solution follows simple linear steps and can easily be modified to add different components; thus, it can be extended to a wide class of models. Using the tools provided, the paper shows that an additional 25 percent ad valorem tariff between high-income and non-high-income countries has a substantial negative effect on real disposable income in all countries, ranging between 0.5 and 7.4 percent. The magnitude of the impact is highly heterogeneous for both income groups, but significantly larger on average for the non-high-income countries.