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Market power, inelastic income elasticity of demand, and terms of trade


  • Michelitsch, Roland
  • Kujal, Praveen


The "Theory of Unequal Exchange" predicts that terms of trade for the producer of primary commodities worsen over time given the low income elasticity of demand for primary product exports and the market power of the industrialized countries. We set up a laboratory economy to test the influence of market power and low income elasticity of demand on trade. An experimental

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  • Michelitsch, Roland & Kujal, Praveen, 1996. "Market power, inelastic income elasticity of demand, and terms of trade," UC3M Working papers. Economics 6013, Universidad Carlos III de Madrid. Departamento de Economía.
  • Handle: RePEc:cte:werepe:6013

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    1. Prados de la Escosura, Leandro, 1994. "Terms of trade and backwardeness: testing the prebisch for spain and britain during the industrialization," UC3M Working papers. Economics 2978, Universidad Carlos III de Madrid. Departamento de Economía.
    2. Charles N. Noussair & Charles R. Plott & Raymond G. Riezman, 2013. "An Experimental Investigation of the Patterns of International Trade," World Scientific Book Chapters,in: International Trade Agreements and Political Economy, chapter 17, pages 299-328 World Scientific Publishing Co. Pte. Ltd..
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