Shadow pricing market access: A trade benefit function approach

Appropriate assessment of the social value of market access is at the core of a broad range of inquiries in trade research. We propose a new approach based on a trade benefit function to obtain the shadow value of net imports. Our approach is in keeping with well-established trade welfare measuremen...

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Bibliographic Details
Published in:Journal of economic theory 2011-07, Vol.146 (4), p.1631-1663
Main Authors: Chau, Nancy H., Färe, Rolf
Format: Article
Language:English
Subjects:
Assessments
Economic models
Economic theory
Economics
Expenditures
Imports
International trade
Market access
Market efficiency
Market structure
Market theory
Markets
Measurement techniques
Price formation
Price theory
Shadow prices
Shadow prices of net imports
Shadows
Simulation
Studies
Trade benefit function
Trade benefit function Shadow prices of net imports
Trade theory
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Summary:Appropriate assessment of the social value of market access is at the core of a broad range of inquiries in trade research. We propose a new approach based on a trade benefit function to obtain the shadow value of net imports. Our approach is in keeping with well-established trade welfare measurement techniques, for the trade benefit function is dual to the standard trade expenditure function. This dual relation further allows for a direct retrieval of the shadow values of net imports from the trade benefit function. The operationality of our approach is demonstrated in a series of applications and simulations.
ISSN:0022-0531
1095-7235
DOI:10.1016/j.jet.2011.05.011