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Analytical notes on the Balassa-Samuelson effect

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  • Leon Podkaminer

    ()
    (The Vienna Institute for International Economic Studies (WIIW), Vienna (Austria))

Abstract

The oft invoked Balassa-Samuelson effect, whereby the movements of prices for non-tradable goods relative to those for tradable goods reflect the movements of relative labour productivities, is customarily derived from a standard neo-classical model with highly restrictive features. Minor modifications to the assumptions underlying the model negate the effect. In general, the effect does not necessarily obtain if technical change alters the elasticity parameters of the production functions. Moreover, theeffect does not generally obtain (or cannot even be derived uniquely) in more general models that allow for non-constant returns to scale or intermediate inputs.

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File URL: http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/9898/9780
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Bibliographic Info

Article provided by Banca Nazionale del Lavoro in its journal BNL Quarterly Review.

Volume (Year): 56 (2003)
Issue (Month): 226 ()
Pages: 207-221

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Handle: RePEc:psl:bnlaqr:2003:32

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Keywords: Technical;

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References

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  1. Willem H. Buiter & Clemens Grafe, 2002. "Anchor, float or abandon ship: exchange rate regimes for the accession countries," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 55(221), pages 111-142.
  2. Kenneth A. Froot & Kenneth Rogoff, 1994. "Perspectives on PPP and Long-Run Real Exchange Rates," NBER Working Papers 4952, National Bureau of Economic Research, Inc.
  3. Buiter, Willem H & Grafe, Clemens, 2002. "Anchor, Float or Abandon Ship: Exchange Rate Regimes for Accession Countries," CEPR Discussion Papers 3184, C.E.P.R. Discussion Papers.
  4. Jose De Gregorio & Alberto Giovannini & Holger C. Wolf, 1993. "International Evidence on Tradables and Nontradables Inflation," Working Papers 93-17, New York University, Leonard N. Stern School of Business, Department of Economics.
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Cited by:
  1. Leon Podkaminer, 2004. "Why is food cheaper in rich (European) countries?," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 57(230), pages 297-327.
  2. Ronald MacDonald & Cezary Wójcik, 2006. "Catching-up, Inflation Differentials and Credit Booms in a Heterogeneous Monetary Union: Some Implications for EMU and new EU Member States," CESifo Working Paper Series 1761, CESifo Group Munich.
  3. Alessandro Podkaminer, 2004. "PerchŽ i generi alimentari sono meno costosi nei paesi (europei) ricchi?," Moneta e Credito, Economia civile, vol. 57(227), pages 311-345.
  4. Leon Podkaminer, 2013. "Persistent gaps between purchasing power parities and exchange rates under the law of one price: a puzzle (partly) explained?," Bank i Kredyt, National Bank of Poland, Economic Institute, vol. 44(4), pages 333-352.
  5. Richard Frensch, 2006. "Balassa-Samuelson, Product Differentiation and Transition," Working Papers 266, Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies).

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