GLOBAL SUBSIDIES INITIATIVE

International Food Policy Research Institute: Opening the Black Box
This paper, produced for the joint WTO-IISD seminar on modeling, draws on a more in-depth analysis (Bouët, 2006) to explain how the main global trade models currently in use capture the benefits from trade liberalization. The main empirical tool for these assessments has been the use of multi-country Computable General Equilibrium (CGE) models. In this accessible overview, Bouët explores the strengths and weaknesses of these models, and the reasons why their results are often so different.

The WTO: Demystifying Modeling Methods for Trade Policy
As in Bouët's paper mentioned above, WTO economists Roberta Piermartini and Robert Teh offer a non-technical analysis the strengths and limitations of CGE models. The structure and data that go into the models determines their results, and this paper provides a useful survey of how the models vary in these respects. But the paper also explores how these models can be used as tools for policy makers. "Models are a distillation of economic theory and so the use of models ensures that policy-making is guided by a correct understanding of how economies function," state the authors. That requires that the modelers understand the needs of policy makers, and that policy makers understand the limitations and caveats that accompany the models.