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Wage Dispersion and Country Price Levels

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  • Robert E. Lipsey
  • Birgitta Swedenborg

Abstract

The purpose of this paper was to investigate whether there is a relationship between the degree of wage dispersion in a country and its price level relative to other countries, compared in a common currency. It was found that once a country's real per capita income and deviations of its exchange rate from its trend value are allowed for, there is a pervasive relationship between wage dispersion and prices. Low wage dispersion, defined as a relatively small difference between the median wage and that of the lowest paid decile of workers, is associated with high price levels. The relationship applies more frequently to service prices than to goods prices, but where it does apply, the effects of wage dispersion are as large for goods as for services.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6039.

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Date of creation: May 1997
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Publication status: published as Wage Dispersion and Country Price Levels , Robert E. Lipsey, Birgitta Swedenborg. in International and Interarea Comparisons of Income, Output, and Prices , Heston and Lipsey. 1999
Handle: RePEc:nbr:nberwo:6039

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  1. Irving B. Kravis & Robert E. Lipsey, 1982. "Towards an Explanation of National Price Levels," NBER Working Papers 1034, National Bureau of Economic Research, Inc.
  2. Falvey, Rodney E & Gemmell, Norman, 1991. "Explaining Service-Price Differences in International Comparisons," American Economic Review, American Economic Association, vol. 81(5), pages 1295-309, December.
  3. Bergstrand, Jeffrey H, 1991. "Structural Determinants of Real Exchange Rates and National Price Levels: Some Empirical Evidence," American Economic Review, American Economic Association, vol. 81(1), pages 325-34, March.
  4. Bhagwati, Jagdish N, 1984. "Why Are Services Cheaper in the Poor Countries?," Economic Journal, Royal Economic Society, vol. 94(374), pages 279-86, June.
  5. Sven W. Arndt & J. David Richardson, 1987. "Real-Financial Linkages Among Open Economies," NBER Working Papers 2230, National Bureau of Economic Research, Inc.
  6. Ephraim Kleiman, 1993. "Taxes and the Price Level," IMF Working Papers 93/5, International Monetary Fund.
  7. Gittleman, Maury & Wolff, Edward N, 1993. "International Comparisons of Inter-industry Wage Differentials," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 39(3), pages 295-312, September.
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Cited by:
  1. Eddy Bekkers & Joseph Francois & Miriam Manchin, 2012. "Import Prices, Income and Inequality," Economics working papers 2012-03, Department of Economics, Johannes Kepler University Linz, Austria.
  2. Alok Kumar, 2004. "Inflation and the Dispersion of Real Wages," Econometric Society 2004 Far Eastern Meetings 750, Econometric Society.
  3. Robert Lipsey & Birgitta Swedenborg, 2010. "Product price differences across countries: determinants and effects," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 146(3), pages 415-435, September.
  4. Stefan Fölster & Sam Peltzman, 2010. "Competition, Regulation and the Role of Local Government Policies in Swedish Markets," NBER Chapters, in: Reforming the Welfare State: Recovery and Beyond in Sweden, pages 253-284 National Bureau of Economic Research, Inc.

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