THE IMPACT OF FREE TRADE BETWEEN ASEAN AND CHINA ON THE INDONESIAN HOUSEHOLDS

indra maipita

Abstract


Free trade agreement between ASEAN and China was executed in early
2010. Various types of trade tariffs have been removed or lowered to 
support the agreement which may lead to changes in the welfare of 
Indonesian households. This research tries to find out the impact of 
ASEAN-China free trade agreement on the welfare of households in 
Indonesia. The model used for this analysis is AGEFIS model, a 
Computable General Equilibrium model of Indonesian economy. The 
findings of this research show that the free trade between ASEAN and 
China increases the level of economic activity. Various macroeconomic 
indicators such as output and exports increase relative to the output prior 
to the free trade agreement. Income of urban households rise but rural 
households are adversely affected. Skilled-workers benefits more than 
unskilled ones.

Keywords : ASEAN-CHINA Free Trade Area, AGEFIS, Shock, SAM


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