Are Wages Equal Across Sectors of Production? A Panel Data Analysis for Tradable and Non-Tradable Goods
No 285, Working Papers from Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies)
The assumption that national labor markets are homogenous across tradable and non-tradable goods is common in multisector (open-economy) macro models and crucial for the prominent Balassa-Samuelson hypothesis. This study tests it with a novel method to distinguish the tradable and non-tradable sectors grounded in economic theory, modern empirical methods and a large and detailed macro data set. It finds that both the internal relationship between productivity and wages in the tradable and non-tradable sectors postulated by the Balassa-Samuelson hypothesis and its external transmission mechanism are rejected.
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Working Paper: Are Wages Equal Across Sectors of Production? A Panel Data Analysis for Tradable and Non-Tradable Goods (2011)
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