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Terms of Trade and Welfare for a Developing Economy with an Imperfectly Competitive Sector

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  • Sen, Partha

Abstract

The effect of terms of trade on the welfare of a small open economy is analyzed. It exports a homogeneous good and imports some brands of a differentiated good. It also produces some brands of the differentiated good which are not traded. A terms-of-trade deterioration causes resources to move to the nontraded, import competing sector. The economy's income rises and the price index for the differentiated good falls, resulting in higher welfare. This accords well with the experience of developing economies of East and Southeast Asia. Copyright 1998 by Blackwell Publishing Ltd

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  • Sen, Partha, 1998. "Terms of Trade and Welfare for a Developing Economy with an Imperfectly Competitive Sector," Review of Development Economics, Wiley Blackwell, vol. 2(1), pages 87-93, February.
  • Handle: RePEc:bla:rdevec:v:2:y:1998:i:1:p:87-93
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    Cited by:

    1. Xiaokai Yang & Dingsheng Zhang, 1999. "International Trade and Income Distribution," CID Working Papers 18A, Center for International Development at Harvard University.
    2. Jeffrey D. Sachs & Xiaokai Yang & Dingsheng Zhang, 1999. "Trade Pattern and Economic Development when Endogenous and Exogenous Comparative Advantages Coexist," CID Working Papers 03A, Center for International Development at Harvard University.
    3. Jeffrey Sachs & Xiaokai Yang & Dingsheng Zhang, 2005. "Globalization, Dual Economy, And Economic Development," World Scientific Book Chapters,in: An Inframarginal Approach To Trade Theory, chapter 16, pages 349-382 World Scientific Publishing Co. Pte. Ltd..
    4. Shinsuke Ikeda, 2009. "Export- and Import-Specific Habit Formation," Review of Development Economics, Wiley Blackwell, vol. 13(4), pages 709-718, November.
    5. Jeffrey D. Sachs & Xiaokai Yang & Dingsheng Zhang, 1999. "Pattern of Trade and Economic Development in the Model of Monopolistic Competition," CID Working Papers 14, Center for International Development at Harvard University.

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