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Terms of Trade and Welfare: A General Analysis

Author

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  • Lahiri, Sajal
  • Ono, Yoshiyasu

Abstract

The authors develop a necessary and a sufficient condition for an improvement in terms of trade to reduce welfare under a general setting, which can accommodate various types of market structures and trade distortions. They also apply the conditions to two specific cases, viz., export subsidies and the existence of monopoly in a nontradeable sector. It is found that a rise in price for an exportable commodity that is subsidized may well reduce welfare. Also, improvements in terms of trade may well harm the economy if there is a nontradeable monopoly sector. Copyright 1989 by The Economic Society of Australia.

Suggested Citation

  • Lahiri, Sajal & Ono, Yoshiyasu, 1989. "Terms of Trade and Welfare: A General Analysis," The Economic Record, The Economic Society of Australia, vol. 65(188), pages 27-31, March.
  • Handle: RePEc:bla:ecorec:v:65:y:1989:i:188:p:27-31
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