Income differences and prices of tradables
AbstractThis paper presents novel evidence of price discrimination, using prices of identical goods in 28 countries. I explain the observed phenomenon via non-homothetic preferences, in a model of trade with product differentiation and firm productivity heterogeneity. The model brings theory and data closer along a key dimension: it generates positively related prices of tradables and income, while preserving exporter behavior and trade flows of existing frameworks. It further captures observations that richer countries buy more per product and consume more diverse bundles. Quantitatively, the model suggests that variable markups account for 80 percent of the positive price-income relationship across 123 countries.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Dallas in its series Globalization and Monetary Policy Institute Working Paper with number 55.
Date of creation: 2010
Date of revision:
Other versions of this item:
- Ina Simonovska, 2009. "Income Differences and Prices of Tradables," 2009 Meeting Papers 692, Society for Economic Dynamics.
- Ina Simonovska, 2011. "Income Differences and Prices of Tradables," Working Papers 1015, University of California, Davis, Department of Economics.
- Ina Simonovska, 2010. "Income Differences and Prices of Tradables," NBER Working Papers 16233, National Bureau of Economic Research, Inc.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
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