Understanding International Price and Consumption Disparities

Long Hai Vo

Review of Income and Wealth, 2023, vol. 69, issue 2, 443-473

Abstract: This study proposes a new measure of the tradability of 120+ commodities based on price dispersion. This approach is used to construct price indices of tradables and non‐tradables for 150+ countries. The expenditure share of tradables is lower for richer countries, while the relative price of non‐tradables, which plays an important role in the determination of real exchange rates, is higher. Secondly, a common‐factor approach (based on principal components) is introduced to compress the large volume of information on prices and quantities consumed globally. We find that cross‐commodity correlations are higher for prices than for consumption. In addition, income is responsible for most of the variation in the first principal component of consumption but explains less of the first price component. This suggests consumption are driven primarily by domestic factors, while prices are determined by factors outside the country, along the lines of the Purchasing Power Parity theory.

Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/roiw.12603

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:revinw:v:69:y:2023:i:2:p:443-473

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0034-6586

Access Statistics for this article

Review of Income and Wealth is currently edited by Conchita D'Ambrosio and Robert J. Hill

More articles in Review of Income and Wealth from International Association for Research in Income and Wealth Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().