International trade

GLOBIOM is a spatial price equilibrium model. This kind of model is particularly useful for the prediction of commodity trade flow patterns between spatially separated supply and demand markets. It is assumed that goods are homogenous and that markets are perfectly competitive.

Tariffs and transportation costs are introduced and are differentiated among each pair of partner and for each product.

Tariffs come from the MAcMap database which includes exhaustive information on the level of applied trade barriers across the world.

Transportation costs have been computed based on the distance between each pair of regions and the transportability of the good (Hummels, 2001)¹.

The applied calibration method which ensures consistency between trade flows, net trade, trade costs and prices, and avoids large discrepancies between observed and computed trade flows is adapted from Jansson and Heckelei (2009)².

¹ Hummels, D. (2001). Toward a Geography of Trade Costs. GTAP Working Paper No. 17. [download]

² Jansson, T. and Heckelei, T. (2009). A new estimator for trade costs and its small sample properties. Economic Modelling 26: 489-498. [download]

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