On the Price of Non-Traded Goods
AbstractIn 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 InfoArticle provided by Department of Economics, Delhi School of Economics in its journal Indian Economic Review.
Volume (Year): 38 (2003)
Issue (Month): 1 (January)
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- F10 - International Economics - - Trade - - - General
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