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Persistent wage differential and its implications on the Balassa-Samuelson hypothesis

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  • Jeong-Joon Lee

Abstract

The objective of the study is to empirically examine the wage equalization assumption in the Balassa-Samuelson (BS) hypothesis. The wage equalization between the traded and the non-traded sectors is tested primarily based on resampling methods, permutation tests. The results show that the assumption does not hold uniformly. This study argues that a more general condition, which allows for wage differential between the sectors, can be used in the BS hypothesis as long as the wage differential is persistent. The persistent wage differential condition is empirically supported in this study.

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File URL: http://www.informaworld.com/openurl?genre=article&doi=10.1080/13504850500166204&magic=repec&7C&7C8674ECAB8BB840C6AD35DC6213A474B5
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics Letters.

Volume (Year): 12 (2005)
Issue (Month): 10 ()
Pages: 643-648

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Handle: RePEc:taf:apeclt:v:12:y:2005:i:10:p:643-648

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  1. Kennedy, Peter E, 1995. "Randomization Tests in Econometrics," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 85-94, January.
  2. Jose De Gregorio & Holger C. Wolf, 1994. "Terms of Trade, Productivity, and the Real Exchange Rate," Working Papers 94-19, New York University, Leonard N. Stern School of Business, Department of Economics.
  3. Menzie David Chinn, 1997. "Sectoral Productivity, Government Spending and Real Exchange Rates: Empirical Evidence for OECD Countries," NBER Working Papers 6017, National Bureau of Economic Research, Inc.
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Cited by:
  1. Olivier Cardi & Romain Restout, 2013. "Imperfect Mobility Of Labor Across Sectors: A Reappraisal Of The Balassa-Samuelson Effect," Working Papers of BETA 2013-04, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  2. Achim Schmillen, 2011. "Are Wages Equal Across Sectors of Production? A Panel Data Analysis for Tradable and Non-Tradable Goods," Working Papers 102, Bavarian Graduate Program in Economics (BGPE).

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