Abstract
This paper examines the positive and welfare implications of monopsony distortions in a small open economy. The equilibrium when one industry exercises its monopsony power is characterized by an endogenous differential between the marginal rates of substitution in production between the two industries. This monopsony distortion leads to various pathological positive results, including non-tangency of the commodity price-ratio with the shrunk-in distorted PPC, output responses unrelated to the convexity or concavity of the distorted PPC, reverse Stolper-Samuelson results, and opposite movements in real wages and real incomes. In addition, the welfare effect of trade liberalization is of ambiguous sign.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
