A modern quantitative trade model to analyze policy options for Austrian foreign trade research
The KITE model provides a tool for simulating and estimating different types of (trade) policy changes. The underlying model is based on a computable general equilibrium (CGE) model, commonly referred to as the “New Quantitative Trade Model”. The model was originally developed by Caliendo & Parro (2015). They created a multi-sector version of the Ricardian trade model of Eaton & Kortum (2002), in which countries produce and sell both domestically and internationally depending on their relative comparative advantage. The model extends this framework by allowing for extensive intra- and international input-output linkages, in which goods and services can enter as both final and intermediate products. Trade policy is pursued by tightening or loosening trade restrictions in the form of tariffs and non-tariff measures.
The model has now been used extensively to evaluate (free) trade agreements (e.g. NAFTA, TTIP) and trade conflicts (e.g. trade embargoes), the trade war between the USA and China, the decoupling of value chains and economic sanctions (e.g. sanctions against Russia, NATO sanctions). It derives the economic consequences for production, value creation and welfare on the basis of predefined scenarios that specify the policy measures to be evaluated. The model allows the use of different types of data sources that can be used in the construction of the underlying model variables and/or parameters.
The KITE model is constantly being updated to improve its efficiency and/or expand the underlying framework. Current projects include the implementation of carbon footprints in production or the introduction of the land factor into the production function.
Use for FIW members:
All FIW members can use the model for free. If you’re interested, simply create a free GitHub account at https://github.com/. Once you’ve done that, send your GitHub username to Hendrik Mahlkow at hendrik.mahlkow@wifo.ac.at. You’ll then be granted access to the KITE GitHub repository. In there, you’ll find a detailed guide on how to install the model and run your first simulations.
Possible participation:
The KITE model is maintained and continuously developed by WIFO together with the Kiel Institute for the World Economy. The cooperation with the Kiel Institute is organized as a “research hub”, so that proven researchers from outside these institutions can also contribute and, under certain conditions, gain access to the model resources; this applies in particular to the research community of the FIW project.
External users are expected to cooperate with researchers from the core team and contribute to the further development of the KITE model.
Contact: If you are interested in using and further developing the KITE model, please contact Mr. Hendrik Mahlkow at hendrik.mahlkow@wifo.ac.at
The establishment and provision of the KITE model in Austria is funded by the Federal Ministry of Labor and Economy.
Research results and examples of application:
- Felbermayr, G., Mahlkow, H. & Sandkamp, A. Cutting through the value chain: the long-run effects of decoupling the East from the West. Empirica 50, 75–108 (2023). https://doi.org/10.1007/s10663-022-09561-w.
- Eppinger, P., Felbermayr, G., Krebs, O., and B. Kukharskyy, 2023. Decoupling GlobalValue Chains, R&R International Economic Review (IER).
- Chowdhry, S., Hinz, J., Kamin, K., and J. Wanner, 2023. Brothers in arms: The value of coalitions in sanctions regimes, forthcoming Economic Policy.
- Mahlkow, H et al, 2023. Long-Run Impacts of the Conflict in Ukraine on Food Security in Africa, R&R African Development Review.
- Hinz, J., Chowdhry, S., Jacobs, A., & Thiele, R. (2022). Effects of the AfCFTA for German and European Companies. IfW Kiel, https://www.ifw-kiel.de/de/publikationen/effects-of-the-afcfta-for-german-and-european-companies-26112/.