Lecture 5 - Isabelle MEJEAN's home page
Lecture 5 - Isabelle MEJEAN's home page
Lecture 5 - Isabelle MEJEAN's home page
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Betts & Devereux (1996)<br />
Campa & Goldberg (2006)<br />
Hypotheses (3): Supply side<br />
The marginal cost has two components: the production cost and the<br />
distribution cost.<br />
Bringing one unit of traded goods to consumers requires units of a<br />
basket of differentiated nontraded goods:<br />
MC t (h) = PC t (h) + m t (h)P Nt<br />
with PC t (h) the cost of producing variety h at producer level,<br />
[ ∫ ] 1<br />
m t (h) =<br />
0 m θ−1 θ<br />
θ−1<br />
θ<br />
n dn the basket of nontraded inputs and PNt<br />
the ideal price index for non-traded inputs.<br />
Per unit production requires imported input share µ t (h) on <strong>home</strong><br />
tradable goods and µ t (n) on <strong>home</strong> nontradable goods<br />
<strong>Isabelle</strong> Méjean <strong>Lecture</strong> 5
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