# **Table 5: Impacts of Global Ten Percent Reduction in Iceberg Trade Costs with Multiple Primary Factors, Sector-Specific Factors and Labor-Leisure Choice**

Results are Hicksian Equivalent Variation as a Percent of Consumption

**All scenarios with four IRTS sectors; trade imbalances and initial tariffs incorporated; intermediates with CES demand****

||1|2|**3**|**4**|**5**|**6**|**7**|**8**|**9**|**10**|**11**|**12**|
|---|---|---|---|---|---|---|---|---|---|---|---|---|
||**Labor a**|**s the singl **|**e factor**|**Three**|**mobile fa**|**ctors**|**Thre**|**e mobile fa**|**ctors**|**Thre**|**e mobile fa**|**ctors**|
||**Sector S**|**pecific Fac**|**tor: No**|**Sector S**|**pecific Fac**|**tor: No**|**Sector**|**Specific Fac**|**tor: Yes**|**Sector S**|**pecific Fac**|**tor: Yes**|
||**Labor-L**|**eisure Cho**|**ice: No**|**Labor-L**|**eisure Cho**|**ice: No**|**Labor-**|**Leisure Ch**|**oice: No**|**Labor-L**|**eisure Cho**|**ice: Yes**|
||**Armington **|**Krugman**|**Melitz**|**Armington **|**Krugman**|**Melitz**|**Armington **|**Krugman**|**Melitz**|**Armington **|**Krugman**|**Melitz**|
|**Region**|**σ(D,M) = 5.98***|**σ = 5.60***|**σ=5.0; a=4.58***|**σ(D,M) = 5.97***|**σ = 5.60***|**σ=5.0; a=4.58***|**σ = 5.81***|**σ = 5.59***|**σ=5.0; a=4.58***|**σ = 5.81***|**σ = 5.59***<br>|**σ=5.0; a=4.58***|
|Australia-New Zealand|3.8%|3.4%|3.3%|3.8%|3.4%|3.3%|3.8%|3.6%|3.5%|3.74%|3.87%|3.88%|
|Canada|4.4%|5.1%|5.3%|4.4%|5.1%|5.3%|4.3%|5.0%|5.2%|4.3%|5.5%|5.7%|
|China|4.0%|6.5%|7.2%|4.0%|6.5%|7.1%|3.9%|6.1%|6.5%|3.9%|6.7%|7.4%|
|Japan|2.2%|3.4%|3.7%|2.2%|3.4%|3.6%|2.2%|3.2%|3.4%|2.2%|3.4%|3.7%|
|Mexico-Chile-Peru|5.0%|5.5%|5.7%|5.0%|5.5%|5.6%|5.0%|5.4%|5.5%|4.9%|5.7%|5.9%|
|Low Income NEC|7.9%|6.7%|6.5%|7.9%|6.7%|6.5%|7.8%|7.4%|7.4%|7.8%|8.0%|8.1%|
|Middle Income NEC|4.3%|3.8%|3.6%|4.3%|3.8%|3.6%|4.2%|4.0%|3.9%|4.2%|4.2%|4.2%|
|OECD NEC|2.5%|3.2%|3.4%|2.5%|3.2%|3.4%|2.5%|3.0%|3.1%|2.5%|3.3%|3.4%|
|Philippines|5.0%|6.1%|6.3%|5.0%|6.0%|6.3%|5.0%|5.8%|6.0%|5.0%|6.2%|6.5%|
|United States|2.0%|2.3%|2.4%|2.0%|2.3%|2.4%|1.9%|2.3%|2.3%|2.0%|2.5%|2.6%|
|average for the World|3.08%|3.63%|3.74%|3.07%|3.62%|3.73%|3.03%|3.53%|3.63%|3.03%|3.82%|3.99%|

* σ(D,M) is the Armington elasticity of substitution between imports and domestic goods; σ is the Dixit-Stiglitz elasticity of substitution between varieties in a sector; “a” is the shape parameter in the Pareto distribution.

**CES demand for intermediates with elasticity of substitution = 0.5. Source: Authors’ estimates.

# **<u>Table 5a: the Feenstra ratio and Proportional Changes in the Terms-of-trade*</u>**

||1|**2**|**3**|**4**<br>**5**|**7**|**8**<br>**9**|**10**<br>**11**|**12**|**13**|**14**|**15**|**16**|**17**|**18**<br>**19**|**20**<br>**21**|
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
||**Se**<br>**La**|**ctor Spe**<br>**bor as t**|**cific Fa**<br>**he Singl **|**ctor: No**<br>**e Factor**|**Se**|**Three Mobile F**<br>**ctor Specific Fa**|**actors**<br>**ctor: No**||**Three**<br>**Sector S**|**Mobile**<br>**pecific Fa**|**Factors**<br>**ctor: Yes**||<br>**Se**|**Three Mobile F**<br>**ctor Specific Fa**|**actors**<br>**ctor: Yes**|
||**La**|**bor-Leis**|**ure Ch**|**oice: No**|**L**|**abor-Leisure Ch**|**oice: No**||**Labor-L**|**eisure Ch**|**oice: No**||**La**|**bor-Leisure Ch**|**oice: Yes**|
||**Armington**|**Krug**|**man**|**Melitz**|**Armington**|**Krugman**|**Melitz**|**Armington**|**Krug**|**man**|**Me**|**litz**|**Armingto**|**n**<br>**Krugman**|**Melitz**|
|**Region**|**TOT**|**TOT**|**Feenstra**|**TOT**<br>**Feenstra**|**TOT**|**TOT**<br>**Feenstra**|**TOT**<br>**Feenstra**|**TOT**|**TOT**|**Feenstra**|**TOT**|**Feenstra**|**TOT**|**TOT**<br>**Feenstra**|**TOT**<br>**Feenstra**|
|Australia-New Zealand|1.022|1.011|1.013|1.011 1.012|1.022|1.011 1.013|1.011 1.012|1.023|1.014|1.014|1.014|1.013|1.022|1.014 1.015|1.014 1.015|
|Canada|1.011|1.016|1.024|1.016 1.027|1.011|1.016 1.024|1.016 1.027|1.011|1.015|1.023|1.015|1.026|1.011|1.015 1.025|1.015 1.029|
|China|0.992|1.000|1.019|1.000 1.023|0.992|1.000 1.019|1.000 1.023|0.992|0.998|1.018|0.998|1.021|0.992|0.998 1.020|0.998 1.024|
|Japan|0.988|0.998|1.016|0.998 1.019|0.988|0.998 1.016|0.998 1.019|0.989|0.997|1.015|0.996|1.018|0.989|0.996 1.016|0.996 1.019|
|Mexico-Chile-Peru|1.013|1.012|1.025|1.012 1.027|1.013|1.012 1.025|1.012 1.026|1.013|1.013|1.025|1.012|1.026|1.013|1.013 1.026|1.012 1.028|
|Low Income NEC|1.020|1.010|1.024|1.010 1.025|1.020|1.010 1.024|1.010 1.025|1.021|1.017|1.027|1.017|1.029|1.020|1.018 1.029|1.018 1.032|
|Middle Income NEC|1.016|1.005|1.014|1.005 1.012|1.016|1.005 1.014|1.005 1.012|1.016|1.008|1.015|1.008|1.014|1.016|1.008 1.016|1.008 1.015|
|OECD NEC|0.992|0.997|1.014|0.998 1.015|0.992|0.997 1.014|0.998 1.015|0.992|0.996|1.014|0.996|1.015|0.992|0.995 1.015|0.995 1.016|
|Philippines|0.998|1.005|1.031|1.005 1.034|0.998|1.005 1.031|1.005 1.034|0.998|1.003|1.030|1.003|1.032|0.998|1.003 1.032|1.003 1.035|
|United States|0.986|0.987|1.014|0.987 1.014|0.986|0.987 1.014|0.987 1.014|0.986|0.986|1.014|0.986|1.013|0.986|0.986 1.015|0.986 1.015|
|average for the World||||||||||||||||

*See section 5 for a definition of these parameters. In the Armington model, the Feenstra ration = 1 in all cases. **Source: Authors estimates**

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