Potential Economic and Household Income Gains from Trade Liberalization by Using MyGTAP Model

Abstract

The current study attempted to calculate the potential gains/losses to the household income in Pakistan. The study has employed MyGTAP model which was initially developed by Minor & Walmsley (2012) and is extension of standard GTAP model. The standard GTAP model was linked with a representative household model by using the Social Accounting Matrix (SAM) to capture the effects of trade liberalization on economic growth and income distribution. The study used eight different simulations to calculate the impact of trade agreements with EU, SAARC, China and India and found a significant rise in economic growth. Regardless of some limitations, the model developed in this study produced significant results that may help to explain the current debate on trade liberalization. The results of the study conclude that it is manufacturing sector that may help to improve the income of all types of household and economic growth.