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On the Price of Non-Traded Goods

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Author Info

  • Masao Oda

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

  • Robert B. Strapp

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

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    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.

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    Bibliographic Info

    Article provided by Department of Economics, Delhi School of Economics in its journal Indian Economic Review.

    Volume (Year): 38 (2003)
    Issue (Month): 1 (January)
    Pages: 115-123

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    Handle: RePEc:dse:indecr:v:38:y:2003:i:1:p:115-123

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    Related research

    Keywords: Non-Traded Goods; Trade Liberalization; Income Effect; Trade Paradox;

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