Table 4: Results of the Sensitivity Analysis

|**SMIMti,**|Sanob<br>**Sloet**|**PotiS**<br>**E.Amut,**|M,.|Med|**S.odU**<br>Dovicc|Pnmb.<br>2t 0|<br>Prb.<br>a PE|50% L..<br>**rBet**|50%**Upe**|**7**<br>**_Lot_**|**75%tpe**<br>Bo<br>**sto**|
|---|---|---|---|---|---|---|---|---|---|---|---|
|UTr|000|0.161<br>|0.21<br>|0.21|003|1.00|0.97|0.19|0.23|0.18||
|USX|1000|I,073|<br>0.841|0.86|0.114|1.00|O.O|0.71|0.93|0.65|0.96|
|UFD|2662|I.13n|.IOD5|1.034|0.118|1.00|0.03|0.87|1.09|0.80|1.12|
|U|1041|L3|_1.301_|1 307|0.139|LO|033|1.20|1.40|1.11|_1A6_|
|LTAR|Io0o|40.125|0.218|-0.211|0.101|0.01|0.22|4.31|4.14|4.36|.010|
|LSX|1000|1004|0.84|0.875|0.117|1.00|00.3|0.70|o.93|0.65|0.96|
|LSX20|I000|0.84|0.7|0782|0.129|1.00|0.38|0.o7|0.85|052|037|
|LFD|tooo|1174|1.003|1.030|0.122|100|0.04|0.86|1.09|0.0|1.12|
|LAlL|_IOO_|_n_<br>1.374|I299|LW08|0.144|1.00|0.34|1.18|_1.40_|1.10|1,46|
|ULT|low|4.058|0.167|4.0172|0.033|0.0|0.0<br>_|.0.19|.0.13|.0.20<br>.|4.12|
|ULMX<br>(|10|4i|.<br>_0.50_|4.0050|0.02|0.001|0.9SO|_4.066_|4.0314<br>.|40.074|-0.02$|
|LVAT|10O0|4.342|.<br>0.097|4_|00|03|1.X|.017|0.00|.0.21|0.0|

of the skewness directly.<sup>35</sup> In order to obtain an indication of the _qualitative_ policy results we report the 'Prob. 2 oa column, which shows the probability from the empirical c'istribution that welfare increased in the counter-factual policy. This<sup>gives</sup> us a measure of the confidence that we have the _sign_ right when we look at the Point Estimate welfare effect<sup>or the</sup> Mean or Median. Similarly, we report a column showing the probability that a welfare effect greater than<sup>or equal</sup> 35 Why do we get such significant skewness in the distributions? There are two general reasons why this right<sup>occur: induced skewress</sup> due to our explicit distributional assumptions. and intrinsic skewness in the (implicit) function linking the set of elasticities<sup>and welfare.</sup> Each can be evaluated.

The explicit assumptions made in our sensitivity analysis result in a large number of skewed distributions for production activities that have benchmnark Leontief technologies. The class of activities that fall into this category are those activities combining intermnediate inputs and value added. In this case we allow perturbations of 0.5 and 1.0, as well as the benchmark value of zero.<sup>To see if</sup><sup>**thiS**is the</sup> source of the skewness we can just remove these penurbations for these activities and te-run the sensitivity analysis<sup>to see if the skewness</sup> disappears. We have done this for the USX policy simulation (making all export subsidies uniform), and find that<sup>it does not account for the</sup> skewness.

The other possible reason for skewed results is more subtle than there being skewed distributional<sup>assumptions, but could wen be</sup> more important. This has to do with the 'asymmetry' of the _implicit ficwon_ that takes a given set of elasticities and<sup>generates the welfare</sup> effect. It is perfectly possible that equi-sized penurbations of a given elasticity can have different<sup>absolute effects on welfare. For example,</sup> the elasticity of substitution between domestically produced and imponed goods in our Armington<sup>aggregate is set at 2 in the benchmark.</sup> We allow equal increases and decreases in this elasticity in our sensitivity analysis. However, it<sup>is plausible that increasing this elasticity to</sup> 3 from 2 has very little impact on welfare, whereas reducing it from 2 to I has a large impact. The<sup>source of our priors on this is no more</sup> than visual and casual inspection of isoquants with the relevant elasticities of substitution: once the elasticity<sup>gets above 2 it stays</sup><sup>**'pretty**</sup> flat', but dropping it down to I adds 'significant curvature'. We can evaluate this<sup>source of skewness with respect to blocks of elasticities</sup> of the same type by just sening those elasticities equal to their PE value. We do this for the USX<sup>policy simulation, and with respect to each</sup> elasticity block. No single block can account for the skewness.

We conclude that there is no single block of elasticities that is causing this skewness.

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