nontradable

Nontradable refers to goods and services that cannot be traded internationally in a meaningful way. In economics, tradability is a spectrum, with fully tradable goods like manufactured exports and nontradable items produced and consumed locally. Nontradables are typically produced and consumed within the same geographic area and must be delivered or consumed where they are produced. Prices for nontradables are largely determined by local supply and demand, wage levels, and regulations rather than by global markets. The concept helps explain differences in inflation and income dynamics across countries.

Common examples of nontradables include housing, local services (haircuts, restaurants, repair services), utilities, and many public services such as local transit. Some services can be partly tradable or tradable in specialized markets, but their nontradable component tends to dominate domestically.

Economic implications: In macroeconomic models, productivity growth in tradable sectors can raise incomes and prices in the nontradable sector through wage spillovers, contributing to changes in the real exchange rate. Because nontradables are closely tied to local demand, inflation in this sector often reflects domestic conditions rather than global price movements. Policymakers monitor nontradable price pressures when setting monetary policy and addressing housing affordability and urban development.

Related concepts include the Balassa-Samuelson effect, tradable versus nontradable sectors, and the real exchange rate.