Endogenous risk and long run effects of liberalization in a global analysis framework

Abstract In a classical Walrassian framework of smoothly functioning markets and comparative static analysis, the beneficial effects of trade liberalization are well known. In the real world, production decisions develop along time. They are fringed with uncertainty, and subject to unfulfilled expectations. Depending upon demand elasticity, such phenomena may lead to “chaotic motion”. A world computable general equilibrium model is developed that contains such specificities and scenarios are run with and without agricultural liberalization. Results suggest that liberalization is not likely to improve welfare. Despite logical difficulties, efforts have been done to test the model against really observed time series.