The welfare effects of free trade agreements in quantitative trade models: A comparison of studies about Transatlantic Trade and Investment Partnership

Abstract

Abstract We compare different methodological approaches to predicting the welfare effects of trade policy experiments. We focus on studies that estimate the economic effects of the Transatlantic Trade and Investment Partnership ( TTIP ). Methodologically, the studies can be divided into those employing computable general equilibrium ( CGE ) models and structural gravity ( SG ) models. We compare and critically discuss differences in the estimated trade cost reductions and in the economic models employed, and how these can explain the relatively wide range of economic effects found in the different TTIP studies. We conclude that reasonable estimates of the welfare effects for the TTIP partners are between 0.5% and 2%.