Productivity, Tradability, and the Long-Run Price Puzzle

Paul Bergin, Reuven Glick and Alan Taylor

No 2004-08, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: Long-run cross-country price data exhibit a puzzle. Today, richer countries exhibit higher price levels than poorer countries, a stylized fact usually attributed to the "Balassa-Samuelson" effect. But looking back fifty years, or more, this effect virtually disappears from the data. What is often assumed to be a universal property is actually quite specific to recent times. What might explain this historical pattern? We adopt a framework where goods are differentiated by tradability and productivity. A model with monopolistic competition, a continuum-of-goods, and endogenous tradability allows for theory and history to be consistent for a wide range of underlying productivity shocks.

Keywords: Prices; Productivity; Econometric models (search for similar items in EconPapers)
JEL-codes: F40 F43 N10 N70 (search for similar items in EconPapers)
Pages: 55
Date: 2004-06-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Chapter: Productivity, Tradability, and the Long-Run Price Puzzle (2017)
Journal Article: Productivity, tradability, and the long-run price puzzle (2006)
Working Paper: Productivity, Tradability, and the Long-Run Price Puzzle (2005)
Working Paper: Productivity, Tradability and the Long-Run Price Puzzle (2004)
Working Paper: Productivity, Tradability, and the Long-Run Price Puzzle (2004)
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DOI: 10.24148/wp2004-08

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