Calibrating a CGE model with NTBs that Incorporates Standard Models of Modern Trade Theory

We propose a way to incorporate NTBs for the four workhorse models of the modern trade literature in computable general equilibrium models (CGEs). CGE models feature intermediate linkages and thus allow us to study global value chains (GVCs). We show that the Ethier-Krugman monopolistic competition model, the Melitz firm heterogeneity model and the Eaton and Kortum model can be defined as an Armington model with generalized marginal costs, generalized trade costs and a demand externality. As already known in the literature in both the Ethier-Krugman model and the Melitz model generalized marginal costs are a function of the amount of factor input bundles. In the Melitz model generalized marginal costs are also a function of the price of the factor input bundles. Lower factor prices raise the number of firms that can enter the market profitably (extensive margin), reducing generalized marginal costs of a representative firm. For the same reason the Melitz model features a demand externality: in a larger market more firms can enter. We implement the different models in a CGE setting with multiple sectors, intermediate linkages, non-homothetic preferences and detailed data on trade costs. We find the largest welfare effects from trade cost reductions in the Melitz model. We also employ the Melitz model to mimic changes in Non tariff Barriers (NTBs) with a fixed cost-character by analysing the effect of changes in fixed trade costs. While we work here with a model calibrated to the GTAP database, the methods developed can also be applied to CGE models based on the WIOD database.

Comparison of iron isotope variations in modern and Ordovician siliceous Fe oxyhydroxide deposits

Formation pathways of ancient siliceous iron formations and related Fe isotopic fractionation are still not completely understood. Investigating these processes, however, is difficult as good modern analogues to ancient iron formations are scarce. Modern siliceous Fe oxyhydroxide deposits are found at marine hydrothermal vent sites, where they precipitate from diffuse, low temperature fluids along faults and fissures on the seafloor. These deposits exhibit textural and chemical features that are similar to some Phanerozoic iron formations, raising the question as to whether the latter could have precipitated from diffuse hydrothermal fluids rather than from hydrothermal plumes. In this study, we present the first data on modern Fe oxyhydroxide deposits from the Jan Mayen hydrothermal vent fields, Norwegian-Greenland Sea. The samples we investigated exhibited very low δ56Fe values between -2.09‰ and -0.66‰. Due to various degrees of partial oxidation, the Fe oxyhydroxides are with one exception either indistinguishable from low-temperature hydrothermal fluids from which they precipitated (-1.84‰ and -1.53‰ in δ56Fe) or are enriched in the heavy Fe isotopes. In addition, we investigated Fe isotope variations in Ordovician jasper beds from the Løkken ophiolite complex, Norway, which have been interpreted to represent diagenetic products of siliceous ferrihydrite precursors that precipitated in a hydrothermal plume, in order to compare different formation pathways of Fe oxyhydroxide deposits. Iron isotopes in the jasper samples have higher δ56Fe values (-0.38‰ to +0.89‰) relative to modern, high-temperature hydrothermal vent fluids (ca. -0.40‰ on average), supporting the fallout model. However, formation of the Ordovician jaspers by diffuse venting cannot be excluded, due to lithological differences of the subsurface of the two investigated vent systems. Our study shows that reliable interpretation of Fe isotope variations in modern and ancient marine Fe oxyhydroxide deposits depends on comprehensive knowledge of the geological context. Furthermore, we demonstrate that very negative δ56Fe values in such samples might not be the result of microbial dissimilatory iron reduction, but could be caused instead by inorganic reactions.