Social Common Capital, Congestion Tax and Non-tradable Goods in a Small Open Economy

IR

Abstract

We construct a static general equilibrium model with social common capitalor highway-type congested public capital. Non-tradable goods arealso introduced into this small open economy. We obtain the effects of animprovement in the terms of trade, as well as an operation in congestiontax, on the degree of congestion and social welfare. We also find that thenon-tradable goods become crucial to the results of comparative staticswhen they are used as the numeraire.

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