Why Are Goods Cheaper in Rich Countries? Beyond the Balassa-Samuelson Effect
AbstractRelative to consumer services, consumer goods tend to be cheaper in richer European countries. This tendency, customarily explained in terms of cost developments and/or foreign-trade considerations, can be a reflection of a demand-side regularity. An econometrically specified cross-country demand system indicates that goods are 'necessities' while services are 'luxuries'. Relative price of goods responds negatively to the rising supply of goods and positively to the rising supply of services, with the former response being much stronger. If the supply of both items were to rise at the same speed, the relative price of goods would have to fall.
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Bibliographic InfoPaper provided by The Vienna Institute for International Economic Studies, wiiw in its series wiiw Working Papers with number 64.
Length: 20 pages including 2 Tables and 6 Figures
Date of creation: Apr 2010
Date of revision:
Publication status: Published as wiiw Working Paper
Find related papers by JEL classification:
- O14 - Economic Development, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
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.:
- Holger C. Wolf & Alberto Giovannini & Jose De Gregorio, 1994.
"International Evidence on Tradables and Nontradables Inflation,"
IMF Working Papers
94/33, International Monetary Fund.
- De Gregorio, Jose & Giovannini, Alberto & Wolf, Holger C., 1994. "International evidence on tradables and nontradables inflation," European Economic Review, Elsevier, vol. 38(6), pages 1225-1244, June.
- Jose De Gregorio & Alberto Giovannini, 1993. "International Evidence on Tradables and Nontradable Inflation," NBER Working Papers 4438, National Bureau of Economic Research, Inc.
- Jose De Gregorio & Alberto Giovannini & Holger C. Wolf, 1993. "International Evidence on Tradables and Nontradables Inflation," Working Papers 93-17, New York University, Leonard N. Stern School of Business, Department of Economics.
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