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The Relative Price of Nontraded Goods and Sectoral Total Factor Productivity: An Empirical Investigation

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  • Vikas Kakkar

    (City University of Hong Kong)

Abstract

This paper examines the relationship between the relative price of nontraded goods and sectoral total factor productivities (TFPs) in the context of the Balassa-Samuelson model. With perfect capital mobility internationally and perfect factor mobility domestically, the relative price of nontraded goods is predicted to be independent of preferences over traded and nontraded goods, and completely determined by TFPs in the traded- and nontraded-goods sectors. Panel cointegration and unit root tests, applied to a panel of fourteen OECD economies, indicate that the relative price of nontraded goods and the labor-share-adjusted TFP differential are cointegrated with the unit cointegration vector. © 2003 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Bibliographic Info

Article provided by MIT Press in its journal Review of Economics and Statistics.

Volume (Year): 85 (2003)
Issue (Month): 2 (May)
Pages: 444-452

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Handle: RePEc:tpr:restat:v:85:y:2003:i:2:p:444-452

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Citations

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Cited by:
  1. Max Groneck & Christoph Kaufmann, 2014. "Relative Sectoral Prices and Population Ageing: A Common Trend," Working Paper Series in Economics 69, University of Cologne, Department of Economics.
  2. Vikas Kakkar & Isabel Yan, 2012. "Real Exchange Rates and Productivity: Evidence from Asia," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44, pages 301-322, 03.
  3. Jagjit S. Chadha, 2008. "Productivity, Preferences and UIP Deviations in an Open Economy Business Cycle Model," Studies in Economics 0808, Department of Economics, University of Kent.
  4. Blanco-Gonzalez, Lorenzo & Fullerton, Thomas M., Jr., 2008. "La Ley del Precio Unitario en la Zona Metropolitana Fronteriza
    [The Law of One Price in the Borderplex]
    ," MPRA Paper 14687, University Library of Munich, Germany.
  5. AKA, Bédia F., 2008. "Revisiting The Export-Output Nexus For Western Africa Countries: A Markov Switching Causality Approach," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 8(1), pages 155-166.
  6. Olivier CARDI & Romain RESTOUT, 2013. "Imperfect Mobility of Labor across Sectors: a Reappraisal of the Balassa-Samuelson Effect," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2013002, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  7. Razgallah, B., 2008. "The Baumol-Balassa-Samuelson Effect Over One Century In Six Eu Countries And The United States," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 8(1), pages 41-52.
  8. Olivier Cardi & Romain Restout, 2010. "Sectoral Effects of Tax Reforms in an Open Economy," Working Papers hal-00544475, HAL.
  9. Romain Restout, 2008. "Monopolistic Competition and the Dependent Economy Model," Working Papers 0803, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  10. Olivier Cardi & Romain Restout, 2007. "Permanent vs Temporary Fiscal Expansion in a Two-Sector Small Open Economy Model," Working Papers 0720, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  11. Maurice Obstfeld, 2009. "Time of Troubles: The Yen and Japan's Economy, 1985-2008," NBER Working Papers 14816, National Bureau of Economic Research, Inc.
  12. Kakkar, Vikas & Yan, Isabel, 2014. "Determinants of real exchange rates: An empirical investigation," BOFIT Discussion Papers 1/2014, Bank of Finland, Institute for Economies in Transition.
  13. Romain Restout, 2009. "The Balassa-Samuelson model in general equilibrium with markup variations," EconomiX Working Papers 2009-39, University of Paris West - Nanterre la Défense, EconomiX.
  14. Yin-Wong Cheung & Eiji Fujii, 2012. "The Penn Effect within a Country - Evidence from Japan," CESifo Working Paper Series 3955, CESifo Group Munich.
  15. Kyriacos Lambrias, 2013. "News Shocks, Real Exchange Rates and International Co-Movements," BCL working papers 83, Central Bank of Luxembourg.
  16. Eiji Fujii, 2013. "Reconsidering the Price-Income Relationship across Countries," CESifo Working Paper Series 4129, CESifo Group Munich.

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