ABSTRACT
In the previous chapter we highlighted the existence of regional confl icts and disparities using qualitative data. In order to analyse the effects of any policy change – such as trade policy reform – quantitatively within the context of regional disparities, it is important to develop an analytical tool that captures regional dimensions in Pakistan. The purpose of this chapter is, therefore, to develop a suitable methodology and database to analyse the effects of trade liberalization at the national and regional levels. To fulfi l this objective, the chapter focuses on three aspects of methodology and data used in the book. First, the chapter begins by examining various modelling approaches with the intention of choosing the most appropriate in pursuit of the objectives of this study. It will then be concluded that CGE modelling is the most adequate technique for the present purposes. It also undertakes a comprehensive analytical survey of the key CGE studies on Pakistan, in particular those that examine the effects of trade liberalization on the economy. Some key limitations of these studies are identifi ed, with a view to avoiding them in the current study. Second, on the basis of the above background, it focuses on developing a CGE model with regional dimensions and explains the salient features and theoretical structure of the core CGE model, without technical details. The chapter will then explain the rationale for selecting the top-down approach to regional modelling as the most appropriate for the purpose of this study. This is followed by a brief explanation of the theoretical structure of the top-down regional extension of the core model. Finally, the chapter focuses on the construction of the database required for the implementation of the core model and its regional extension. The chapter ends with a summary and some concluding remarks.
