Non-traded goods and optimal trade policy in a cash-in-advance economy
This paper develops a standard trade model of a small open monetary economy with two traded and one non-traded goods. Money is introduced through a generalized cash-in-advance constraint where the share of goods purchases that must be made using cash, varies across sectors. We find that free trade may be harmful so that alternative policy instruments may be considered to improve welfare. In addition, we study and compare the optimal tariff formula and the optimal consumption tax structure. In the presence of a monetary distortion of the non-traded good, a consumption tax may not Pareto dominate a tariff although the latter bears an additional production burden. This corroborates the theory of second best.
Volume (Year): 10 (2001)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RJTE20 |
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RJTE20|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jones, Ronald W, 1974. "Trade with Non-traded Goods: The Anatomy of Inter-connected Markets," Economica, London School of Economics and Political Science, vol. 41(162), pages 121-38, May.
- Yu, Eden S H, 1982. "Unemployment and the Theory of Customs Unions," Economic Journal, Royal Economic Society, vol. 92(366), pages 399-404, June.
- E. Kwan Choi & Hamid Beladi, 1998.
"Welfare Reducing Trade and Optimal Trade Policy,"
Center for Agricultural and Rural Development (CARD) Publications
98-wp196, Center for Agricultural and Rural Development (CARD) at Iowa State University.
- Choi, E. Kwan & Beladi, Hamid, 1998. "Welfare Reducing Trade and Optimal Trade Policy," Staff General Research Papers 1287, Iowa State University, Department of Economics.
- E. Kwan Choi & Hamid Beladi, 1998. "Welfare Reducing Trade and Optimal Trade Policy," Food and Agricultural Policy Research Institute (FAPRI) Publications 98-wp196, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
- Cramer, J. S. & Reekers, G. M., 1976. "Money demand by sector : A survey for the Netherlands in 1971," Journal of Monetary Economics, Elsevier, vol. 2(1), pages 99-112, January.
- Theodore Palivos & Chong K. Yip, 1997.
"The Gains from Trade for a Monetary Economy Once Again,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 30(1), pages 208-23, February.
- Theodore, Palivos & Chong K. Yip, 1996. "The Gains from Trade for a Monetary Economy Once Again," Departmental Working Papers _071, Chinese University of Hong Kong, Department of Economics.
- Batra, Raveendra N & Beladi, Hamid, 1990. "Pattern of Trade between Underemployed Economies," Economica, London School of Economics and Political Science, vol. 57(228), pages 485-93, November.
- Hazari, Bharat R. & Sgro, Pasquale M., 1991. "Urban-rural structural adjustment, urban unemployment with traded and non-traded goods," Journal of Development Economics, Elsevier, vol. 35(1), pages 187-196, January.
- Wong, Kar-yiu, 1991. "Welfare comparison of trade situations," Journal of International Economics, Elsevier, vol. 30(1-2), pages 49-68, February.
- Corden, W Max & Neary, J Peter, 1982. "Booming Sector and De-Industrialisation in a Small Open Economy," Economic Journal, Royal Economic Society, vol. 92(368), pages 825-48, December.
- Jeffrey B. Nugent & Makoto Yano, 1999.
"Aid, Nontraded Goods, and the Transfer Paradox in Small Countries,"
American Economic Review,
American Economic Association, vol. 89(3), pages 431-449, June.
- Yano, M. & Nugent, J.B. & Lay, R.N., 1995. "Aid, Non-Traded Goods and the Transfer Paradox in Small Countries," Papers 9515, Southern California - Department of Economics.
- Hamid Beladi & Sugata Marjit, 1996. "An Analysis of Rural-Urban Migration and Protection," Canadian Journal of Economics, Canadian Economics Association, vol. 29(4), pages 930-40, November.
When requesting a correction, please mention this item's handle: RePEc:taf:jitecd:v:10:y:2001:i:1:p:23-37. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.