Working Paper: CEPR ID: DP1002
Authors: L. Alan Winters
Abstract: This paper constructs a simple model of the steel sector in Europe distinguishing eight West and two East European regions. It models the production of steel and also the various trade restrictions extant in 1992. It uses this model first to calculate the output and welfare effects of rationalizing the sector to remove the excess capacity experienced in 1992 and second to explore the consequences of the mutual trade liberalization between Eastern and Western Europe envisaged under the Europe Agreements. The latter allow major increases in output in the East (18%) and offer Western steel users significant welfare benefits (ECU 190 million). Eastern consumers and Western producers suffer (smaller) losses, but total output in the EU falls only by about 1.5%.
Keywords: steel; integration; Europe; Europe Agreements; modelling
JEL Codes: F13; F14; F15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Trade liberalization (F13) | Output in Eastern Europe (P29) |
| Trade liberalization (F13) | Welfare benefits for Western steel users (I38) |
| Trade liberalization (F13) | Total output in the EU (E23) |
| Trade liberalization (F13) | Output reduction in Southern Europe (O52) |
| Trade liberalization (F13) | Output reduction in Germany (O52) |
| Removal of price minima (D41) | Exports from CEEC producers (F14) |
| Removal of price minima (D41) | Prices for CEEC consumers (P22) |
| Removal of price minima (D41) | Welfare gains for CEEC producers (D69) |