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An Elementary Theorem on Gains from Virtual Trade

Author

Listed:
  • Sugata Marjit

    (Indian Institute of Foreign Trade,Kolkata,India)

  • Lei Yang

    (Hong Kong Polytechnic University)

Abstract

Virtual markets allow consumers to save time costs to purchase goods and services. Countries lose relative to the conventional welfare gain when they increase consumption of non-virtual goods under free trade. We include the classical gains from trade theorem as a special case. For two identical countries that have same endowment and technology, the income difference between them can generate trade when we consider the time cost of purchasing goods. The rich country exports the non-virtual good and imports the virtual good while the poor country exports the virtual good and imports the non-virtual good.

Suggested Citation

  • Sugata Marjit & Lei Yang, 2020. "An Elementary Theorem on Gains from Virtual Trade," Working Papers 2046, Indian Institute of Foreign Trade.
    • Handle: RePEc:ift:wpaper:2046
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Virtual Trade; Time Cost;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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