Globalisation and sticky prices : “Con” or conundrum?

Albertson, K; Simister, J; Syme, RA

Abstract

With reference to a case study which illustrates the existence of segmented markets and international price discrimination, this paper develops a theoretical model of comparative advantage in which domestic prices may be sticky. We show, when domestic prices do not converge to world prices, the effects of international trade upon domestic welfare are ambiguous. In particular, for a nation with no absolute advantage, specialising in comparatively advantageous production will reduce welfare where prices are sticky. This finding contrasts with the general view that pursuit of comparative advantage will always increase welfare.

Citation

Albertson, K., Simister, J., & Syme, R. (2015). Globalisation and sticky prices : “Con” or conundrum?

• Journal Article Type: Article
• Publication Date: Dec 11, 2015
• Deposit Date: Apr 4, 2016
• Journal: Real-World Economics Review
• Issue: 73
• Pages: 93-98
• Publisher URL: http://www.paecon.net/PAEReview/issue73/Albertson73.pdf
• Related Public URLs: http://www.paecon.net/PAEReview/