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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
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    References listed on IDEAS

    as
    1. Edwin J. Elton & T. Clifton Green, 1998. "Tax and Liquidity Effects in Pricing Government Bonds," Journal of Finance, American Finance Association, vol. 53(5), pages 1533-1562, October.
    2. McCulloch, J Huston, 1971. "Measuring the Term Structure of Interest Rates," The Journal of Business, University of Chicago Press, vol. 44(1), pages 19-31, January.
    3. Schaefer, Stephen M, 1981. "Measuring a Tax-Specific Term Structure of Interest Rates in the Market for British Government Securities," Economic Journal, Royal Economic Society, vol. 91(362), pages 415-438, June.
    4. Robichek, Alexander A & Niebuhr, W David, 1970. "Tax-Induced Bias in Reported Treasury Yields," Journal of Finance, American Finance Association, vol. 25(5), pages 1081-1090, December.
    5. Carleton, Willard T & Cooper, Ian A, 1976. "Estimation and Uses of the Term Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 31(4), pages 1067-1083, September.
    6. Nelson, Charles R & Siegel, Andrew F, 1987. "Parsimonious Modeling of Yield Curves," The Journal of Business, University of Chicago Press, vol. 60(4), pages 473-489, October.
    7. Hall, Anthony D & Anderson, Heather M & Granger, Clive W J, 1992. "A Cointegration Analysis of Treasury Bill Yields," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 116-126, February.
    8. McCulloch, J Huston, 1975. "The Tax-Adjusted Yield Curve," Journal of Finance, American Finance Association, vol. 30(3), pages 811-830, June.
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    More about this item

    Keywords

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

    JEL classification:

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

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