Price Equalization Does Not Imply Free Trade

RePEc Short ID: pra33
ORCID iD: 0000-0001-6991-4677

Mutreja, Piyusha; Ravikumar, B.; Riezman, Raymond; Sposi, Michael

doi:10.20955/r.2015.323-39

Journal Article

Price Equalization Does Not Imply Free Trade

Abstract: In this article, the authors demonstrate the possibility of price equalization in a two-country world with barriers to international trade. For price equalization to occur when the countries are asymmetric, the country with higher productivity must also be the one with the lower trade barrier. A corollary of the authors? result is that small departures from purchasing power parity do not necessarily imply that world trade is mostly integrated.

JEL Classification: F13; F11; F14;

https://doi.org/10.20955/r.2015.323-39