Productivity, Tradability, and the Long-Run Price Puzzle

Paul Bergin, Reuven Glick and Alan Taylor

No 10569, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: F40 F43 (search for similar items in EconPapers)
Date: 2004-06
Note: DAE ITI PR
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Citations: View citations in EconPapers (30)

Published as Bergin, Paul R. & Glick, Reuven & Taylor, Alan M., 2006. "Productivity, tradability, and the long-run price puzzle," Journal of Monetary Economics, Elsevier, vol. 53(8), pages 2041-2066, November.

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Related works:
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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