The Price of Development

Fadi Hassan ()
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Fadi Hassan: Trinity College Dublin

The Institute for International Integration Studies Discussion Paper Series from IIIS

Abstract: The Penn-Balassa-Samuelson e?ect is the stylized fact about the positive correlation between cross-country price level and per-capita income. This paper provides evidence that the price-income relation is actually non-linearand turns negative in low income countries. The result is robust along both cross-section and panel dimensions. Additional robustness checks show thatbiases in PPP estimation and measurement error in low-income countries do not drive the result. The different stage of development between countriescan explain this new ?nding. The paper shows that a model linking the price level to the process of structural transformation captures the non-monotonic pattern of the data.

Keywords: real; exchange; rate (search for similar items in EconPapers)
JEL-codes: E31 F4 O1 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2014-04
New Economics Papers: this item is included in nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:iis:dispap:iiisdp446

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