Abstract
True trade price and quantity indices for a multihousehold distorted small open economy are developed using trade expenditure functions. The distortions are border distortions due to taxes and subsidies on international trade flows. Using these indices we derive globally valid conditions for welfare gains or losses resulting from changes in international prices. These are developed first for the aggregate economy and then we show that the economy-wide indices can be extended to indices for individual households. Finally, we show several reasons why the standard fixed- weighted index of the commodity terms of trade does not index the welfare of the economy.
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© 1994 Springer-Verlag Berlin · Heidelberg
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Lloyd, P.J., Schweinberger, A.G. (1994). Indices of Welfare for the Economy and Households in Distorted Open Economies. In: Eichhorn, W. (eds) Models and Measurement of Welfare and Inequality. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-79037-9_40
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DOI: https://doi.org/10.1007/978-3-642-79037-9_40
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