Can Balassa and Samuelson effect explain the international price disparity between low and high income countries?

Turan Subasat ()

Economics Bulletin, 2010, vol. 30, issue 3, 2495-2504

Abstract: This article assesses the Balassa and Samuelson effect which offers an explanation of the differences in international prices based on productivity disparity between tradables and nontradables. It argues that although the Balassa and Samuelson effect provides a reasonable explanation for the deviations in price levels between countries that export similar types of commodities, it is less compelling in terms of explaining the price differences between low and high income countries, as these countries typically export dissimilar types of commodities.

Keywords: Balassa and Samuelson effect; international price disparity (search for similar items in EconPapers)
JEL-codes: E3 (search for similar items in EconPapers)
Date: 2010-09-27
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