The effects of energy and commodity prices on commodity output in a three-factor, two-good general equilibrium trade model

Yoshiaki Nakada ()

Papers from arXiv.org

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.

Date: 2017-11, Revised 2018-11
New Economics Papers: this item is included in nep-ene
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