The effects of energy and commodity prices on commodity output in a three-factor, two-good general equilibrium trade model
Abstract
We analyze the effects of energy and commodity prices on commodity output using a three-factor, two-good general equilibrium trade model with three factors: capital, labor, and imported energy. We derive a sufficient condition for each sign pattern of each relationship to hold, which no other studies have derived. We assume factor-intensity ranking is constant and use the EWS (economy-wide substitution)-ratio vector and the Hadamard product in the analysis. The results reveal that the position of the EWS-ratio vector determines the relationships. Specifically, the strengthening (resp. reduction) of import restrictions can increase (resp. decrease) the commodity output of exportables, if capital and labor, domestic factors, are economy-wide complements. This seems paradoxical.
Keywords
Cite
@article{arxiv.1711.10096,
title = {The effects of energy and commodity prices on commodity output in a three-factor, two-good general equilibrium trade model},
author = {Yoshiaki Nakada},
journal= {arXiv preprint arXiv:1711.10096},
year = {2018}
}
Comments
23 pages, 2 figures