Income Differences and Prices of Tradables
AbstractI study the positive relationship between prices of tradable goods and per-capita income. I develop a highly tractable general equilibrium model of international trade with heterogeneous firms and non-homothetic consumer preferences that accounts for the observed cross-country variation in prices along two key dimensions. The model yields a new testable prediction that relates prices to measurable variables. I use the prediction to estimate the elasticity of price with respect to per-capita income from unique data featuring prices of 245 identical goods sold exclusively via the Internet in twenty-nine European, Asian, and North American markets. The empirical findings suggest that variable mark-ups account for a third of the observed cross-country differences in prices of tradables.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of California, Davis, Department of Economics in its series Working Papers with number 1015.
Date of creation: 11 Nov 2011
Date of revision:
PPP failure; variable mark-ups; heterogeneous firms; non-homothetic preferences;
Other versions of this item:
- Ina Simonovska, 2009. "Income Differences and Prices of Tradables," 2009 Meeting Papers 692, Society for Economic Dynamics.
- Ina Simonovska, 2010. "Income differences and prices of tradables," Globalization and Monetary Policy Institute Working Paper 55, Federal Reserve Bank of Dallas.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Marc J. Melitz & Gianmarco I. P. Ottaviano, 2008.
"Market Size, Trade, and Productivity,"
Review of Economic Studies,
Oxford University Press, vol. 75(1), pages 295-316.
- Ottaviano, Gianmarco & Melitz, Marc, 2008. "Market Size, Trade, and Productivity," Scholarly Articles 3229096, Harvard University Department of Economics.
- Marc J. Melitz & Gianmarco I.P. Ottaviano, 2005. "Market Size, Trade, and Productivity," NBER Working Papers 11393, National Bureau of Economic Research, Inc.
- Marc J. Melitz & Gianmarco I.P. Ottaviano, 2005. "Market Size, Trade, and Productivity," Development Working Papers 201, Centro Studi Luca d\'Agliano, University of Milano.
- George Alessandria & Joseph P. Kaboski, 2011.
"Pricing-to-Market and the Failure of Absolute PPP,"
American Economic Journal: Macroeconomics,
American Economic Association, vol. 3(1), pages 91-127, January.
- Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
- Mario J. Crucini & Mototsugu Shintani, 2002.
"Persistence in Law-Of-One-Price Deviations: Evidence from Micro-Data,"
Vanderbilt University Department of Economics Working Papers
0222, Vanderbilt University Department of Economics, revised Jul 2004.
- Crucini, Mario J. & Shintani, Mototsugu, 2008. "Persistence in law of one price deviations: Evidence from micro-data," Journal of Monetary Economics, Elsevier, vol. 55(3), pages 629-644, April.
- Mario J. Crucini & Mototsugu Shintani, 2006. "Persistence in Law-Of-One-Price Deviations: Evidence from Micro-Data," Vanderbilt University Department of Economics Working Papers 0616, Vanderbilt University Department of Economics.
- Mario J. Crucini & Mototsugu Shintani, 2006. "Persistence in Law-of-One-Price Deviations: Evidence from Micro-data," Levine's Bibliography 321307000000000311, UCLA Department of Economics.
- Michael E. Waugh, 2009.
"International trade and income differences,"
435, Federal Reserve Bank of Minneapolis.
- Costas Arkolakis & Svetlana Demidova & Peter J. Klenow & Andrés Rodríguez-Clare, 2008.
"Endogenous Variety and the Gains from Trade,"
NBER Working Papers
13933, National Bureau of Economic Research, Inc.
- Costas Arkolakis, 2008. "Market Penetration Costs and Trade Dynamics," 2008 Meeting Papers 548, Society for Economic Dynamics.
- Peter K. Schott, 2004. "Across-product Versus Within-product Specialization in International Trade," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 646-677, May.
- Robert C. Feenstra & Robert E. Lipsey & Haiyan Deng & Alyson C. Ma & Hengyong Mo, 2005. "World Trade Flows: 1962-2000," NBER Working Papers 11040, National Bureau of Economic Research, Inc.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Scott Dyer).
If references are entirely missing, you can add them using this form.