Price equalization does not imply free trade

Piyusha Mutreja, B. Ravikumar, Raymond G. Riezman, Michael J. Sposi

Research output: Contribution to journalArticlepeer-review


In this article, the authors demonstrate the possibility of price equalization in a two-country world with barriers to international trade. For price equalization to occur when the countries are asymmetric, the country with higher productivity must also be the one with the lower trade barrier. A corollary of the authors’ result is that small departures from purchasing power parity do not necessarily imply that world trade is mostly integrated.

Original languageEnglish (US)
Pages (from-to)323-339
Number of pages17
JournalFederal Reserve Bank of St. Louis Review
Issue number4
StatePublished - 2015

ASJC Scopus subject areas

  • Business and International Management


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