Three essays on international trade *policy.

Abstract

Little work has been done to assess the accuracy of computable general equilibrium (CGE) models of trade policy. The first essay addresses the question of simulation accuracy in the context of a model of the U.S.-Canada Free Trade Agreement. I adjust the model for macroeconomic shocks that are not part of the original experiment and then develop and apply a method for measuring the performance of the model. I conclude that while the model is effective at simulating changes in sectoral. trade flows, it is far less successful at simulating changes in employment and output by sector. The second essay addresses similar questions of CGE accuracy, but with respect to the role of returns to scale. I incorporate new estimates of returns to scale by sector and test the influence these parameters have on the outcome of the model using the methodology developed in the first essay. I conclude that while the returns to scale does play some role in the welfare results reported, that role is a relatively modest one. I also find that relatively high returns to scale worsen the model's ability to simulate changes in trade flows. The third essay treats a different topic: the role of donations from political action committees (PACs) in the child labor and trade debate. While the motivation to sponsor legislation prohibiting the importation of goods produced by child labor has been studied elsewhere, the role of political contributions in the process has not. I first present a short history of such legislation. Next I survey the work that has already been done in the literature. I then use various estimation techniques to study the role of PAC contributions on the decision to sponsor the Child Labor Deterrence Act of 1995. I conclude that there is weak evidence to support the hypothesis that sponsorship of such legislation is favorably influenced by donations from labor-oriented PACs and negatively by contributions from business-oriented PACs.