1887

OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

Quantifying the Effects of Trade Liberalisation in Brazil

A Computable General Equilibrium Model (CGE) Simulation

Brazil remains a fairly closed economy, with small trade flows relative to its share of world income. This paper explores the effects of three possible policy reforms to strengthen Brazil’s integration into global trade: a reduction in import tariffs, less local content requirements and a full zero-rating of exports in indirect taxes. A simulation analysis using the OECD Multi-Region Trade CGE model suggests that current policies are holding back exports, production and investment in Brazil. The model simulations suggest significant scope for trade policy reforms to strengthen industrial development and export competitiveness. Results also show that the expansion of investment and production would be accompanied by significant employment gains. Moreover, employment growth is higher for low-skilled occupations, implying that a major trade and tax policy reform aiming at liberalising trade flows would particularly help those at the lower end of the income distribution.

English

Keywords: global value chains, CGE modelling, trade policy
JEL: F66: International Economics / Economic Impacts of Globalization / Economic Impacts of Globalization: Labor; F13: International Economics / Trade / Trade Policy; International Trade Organizations; F61: International Economics / Economic Impacts of Globalization / Economic Impacts of Globalization: Microeconomic Impacts; F62: International Economics / Economic Impacts of Globalization / Economic Impacts of Globalization: Macroeconomic Impacts; F47: International Economics / Macroeconomic Aspects of International Trade and Finance / Macroeconomic Aspects of International Trade and Finance: Forecasting and Simulation: Models and Applications
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