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On the Price of Non-Traded Goods

Author

Listed:
  • Masao Oda

    (Department of Economics, Kansai University, Osaka 5648680, Japan)

  • Robert B. Strapp

    (Department of Economics, University of Arkansas, Fayetteville, AR USA)

Abstract

In order to explain the price increase of non-traded goods in the face of trade and trade liberalization, this paper develops a simple model of non-traded goods with a tariff and analyzes how trade, trade policy, and changes within the non-traded sector influence the price of the non-traded goods in a unified way. It is shown that if the income effect dominates the cross substitution effects, a decline in the price of imports or a tariff reduction may increase the price of the non-traded goods. We also show that a change in the terms of trade may produce a magnified effect on the price of the non-traded good.

Suggested Citation

  • Masao Oda & Robert B. Strapp, 2003. "On the Price of Non-Traded Goods," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 38(1), pages 115-123, January.
    • Handle: RePEc:dse:indecr:v:38:y:2003:i:1:p:115-123
    as

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    More about this item

    Keywords

    Non-Traded Goods; Trade Liberalization; Income Effect; Trade Paradox;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General

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