Income Differences and Prices of Tradables

Ina Simonovska ()

No 16233, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: I study the positive relationship between prices of tradable goods and per-capita income. I develop a highly tractable general equilibrium model of international trade with heterogeneous firms and non-homothetic consumer preferences that accounts for the observed cross-country variation in prices along two key dimensions. The model yields a new testable prediction that relates prices to measurable variables. I use the prediction to estimate the elasticity of price with respect to per-capita income from unique data featuring prices of 245 identical goods sold exclusively via the Internet in twenty-nine European, Asian, and North American markets. The empirical findings suggest that variable mark-ups account for a third of the observed cross-country differences in prices of tradables.

JEL-codes: E31 F12 L11 (search for similar items in EconPapers)
Date: 2010-07
Note: ITI
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Related works:
Working Paper: Income Differences and Prices of Tradables (2011)
Working Paper: Income differences and prices of tradables (2010)
Working Paper: Income Differences and Prices of Tradables (2009)
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