Every country produces goods which cannot be traded at all either because of the nature of the goods, like houses, services, etc., or because of political barriers preventing, for example, the export of certain strategic military equipment, or because of artificial trade barriers like prohibitive tariffs. In all the preceding chapters we ignored the presence of such products, much at the expense of economic reality. The objective of this chapter is to examine how and to what extent the results derived from the two-traded-goods model are modified when a non-traded final good is incorporated into the framework.
KeywordsWage Differential Pure Theory Factor Supply Domestic Good Production Subsidy
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