Why are nontraded goods cheaper in poor countries?
Hailong Jin and
E. Kwan Choi
International Review of Economics & Finance, 2018, vol. 58, issue C, 210-219
Balassa and Samuelson argued that production technologies differ among countries, and the price of the nontraded good is higher in countries with higher labor productivity. This paper shows that the Balassa-Samuelson effect exists even when countries share identical production technologies. In the celebrated Heckscher-Ohlin model, changes in factor endowments do not affect the equalized factor prices. This paper considers a three-factor, three-industry model, and demonstrates that endowment differences between countries can cause disparities in their wage rates and the prices of the nontraded good. A dynamic panel data analysis shows that a 10% increase in per capita real GDP results in a 2% increase in the housing price for non-EU OECD countries.
Keywords: Balassa-Samuelson effect; Nontraded good; Factor price equalization (search for similar items in EconPapers)
JEL-codes: F1 O1 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:58:y:2018:i:c:p:210-219
Access Statistics for this article
International Review of Economics & Finance is currently edited by H. Beladi and C. Chen
More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().