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Explaining Service-Price Differences in International Comparisons

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  • Falvey, Rodney E
  • Gemmell, Norman

Abstract

This paper reexamines observed international differences in the price of services and the positive correlation of these with per capita GDP differences. Using a general trade model with a nontraced sector, the authors find that differences in countries' factor endowments, populations, trade policies, and trade balances will have ambiguous and sometimes opposite effects on their service prices and real incomes. Estimating the service-price equation using recent data suggests that larger endowments of agricultural land, minerals, and capital, larger trade deficits, and higher prices for tradables increase service prices. Conversely, larger populations and labor forces reduce service prices. Copyright 1991 by American Economic Association.

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 81 (1991)
Issue (Month): 5 (December)
Pages: 1295-309

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Handle: RePEc:aea:aecrev:v:81:y:1991:i:5:p:1295-309

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Cited by:
  1. Pilar González Murias, 1998. "La paridad de poder adquisitivo: concepto y evolución histórica," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 9, pages 79-102, Junio.
  2. Balvers, Ronald J. & H. Bergstrand, Jeffrey, 1997. "Equilibrium real exchange rates: closed-form theoretical solutions and some empirical evidence," Journal of International Money and Finance, Elsevier, vol. 16(3), pages 345-366, June.
  3. Sebastian Edwards & Miguel A. Savastano, 1999. "Exchange Rates in Emerging Economies: What Do We Know? What Do We Need to Know?," NBER Working Papers 7228, National Bureau of Economic Research, Inc.
  4. C L Melliss, 1993. "Tradable and non-tradable prices in the UK and EC: measurement and explanation," Bank of England working papers 15, Bank of England.
  5. Robert E. Lipsey & Birgitta Swedenborg, 1997. "Wage Dispersion and Country Price Levels," NBER Working Papers 6039, National Bureau of Economic Research, Inc.
  6. Falvey, Rodney E & Gemmell, Norman & Chang, Cherry & Zheng, Guanyu, 2014. "Explaining International Differences in the Prices of Tradables and Non-Tradables (with a New Zealand Perspective)," Working Paper Series 3425, Victoria University of Wellington, Chair in Public Finance.
  7. Warwick J McKibbin & Will Martin, 1998. "The East Asian Crisis: Investigating Causes and Policy Responses," Departmental Working Papers 1998-06, The Australian National University, Arndt-Corden Department of Economics.
  8. Ephraim Kleiman, 1997. "National Price Levels: Do Taxes Matter?," International Tax and Public Finance, Springer, vol. 4(3), pages 361-377, July.
  9. Falvey, Rodney E. & Gemmell, Norman, 1995. "Explaining international differences in the share of services in real expenditure," Economics Letters, Elsevier, vol. 47(1), pages 53-58, January.
  10. Martin, Will J. & Warr, Peter G., 1994. "Determinants of agriculture's relative decline: Thailand," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 11(2-3), December.

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