Price Equalization Does Not Imply Free Trade

18 Pages Posted: 29 Mar 2016 Last revised: 15 Oct 2019

See all articles by Piyusha Mutreja

Piyusha Mutreja

Syracuse University - Department of Economics

B. Ravikumar

Federal Reserve Bank of Saint Louis

Raymond G. Riezman

University of Iowa - Henry B. Tippie College of Business - Department of Economics; Aarhus University - Department of Economics and Business; University of California, Santa Barbara (UCSB) - Department of Economics; GEP; CESifo (Center for Economic Studies and Ifo Institute)

Michael Sposi

Southern Methodist University (SMU)

Multiple version iconThere are 3 versions of this paper

Date Written: 2015

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: F11, F13, F14

Suggested Citation

Mutreja, Piyusha and Ravikumar, B. and Riezman, Raymond G. and Sposi, Michael, Price Equalization Does Not Imply Free Trade (2015). Review, Vol. 97, Issue 4, pp. 323-39, 2015. Available at SSRN: https://ssrn.com/abstract=2754969 or http://dx.doi.org/10.20955/r.2015.323-39

Piyusha Mutreja (Contact Author)

Syracuse University - Department of Economics ( email )

110 Eggers Hall
Department of Economics
Syracuse, NY 13244
United States

HOME PAGE: http://www.maxwell.syr.edu/econ/

B. Ravikumar

Federal Reserve Bank of Saint Louis ( email )

411 Locust St
Saint Louis, MO 63011
United States

Raymond G. Riezman

University of Iowa - Henry B. Tippie College of Business - Department of Economics ( email )

316 PBB
Iowa City, IA 52242
United States

HOME PAGE: http://www.biz.uiowa.edu/faculty/rriezman/

Aarhus University - Department of Economics and Business ( email )

Fuglesangs Alle 4
Aarus, 8210
Denmark

HOME PAGE: http://www.biz.uiowa.edu/faculty/rriezman/

University of California, Santa Barbara (UCSB) - Department of Economics ( email )

2127 North Hall
Santa Barbara, CA 93106
United States

GEP ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.cesifo.de

Michael Sposi

Southern Methodist University (SMU) ( email )

6212 Bishop Blvd.
Dallas, TX 75275
United States

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