Reconsidering the Price-Income Relationship across Countries

Eiji Fujii

No 4129, CESifo Working Paper Series from CESifo

Abstract: This study reconsiders the well-known cross-country positive association between prices and income by focusing on heterogeneity between the inter-developed-country and inter-developing-country relationships. Empirical results reveal not only that developed and developing countries differ in magnitude of the income effect on prices, but also that they exhibit the positive price-income association for different reasons. Specifically, we find only for the inter-developed-country case that the positive price-income association is attributable, at least partly, to the Balassa-Samuelson productivity differential effect. The idiosyncrasy of the inter-developing-country relationship is not dissolved by controlling for the effects of a variety of real and financial variables.

Keywords: Balassa-Samuelson effect; non-traded goods; purchasing power parity; Penn effect; price-income relationship; productivity differential; real exchange rate (search for similar items in EconPapers)
JEL-codes: E01 F31 F41 (search for similar items in EconPapers)
Date: 2013
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Related works:
Journal Article: Reconsidering The Price–Income Relationship Across Countries (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_4129

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