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Can Balassa and Samuelson effect explain the international price disparity between low and high income countries?

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  • Turan Subasat

    (University of Bath)

Abstract

This article assesses the Balassa and Samuelson effect which offers an explanation of the differences in international prices based on productivity disparity between tradables and nontradables. It argues that although the Balassa and Samuelson effect provides a reasonable explanation for the deviations in price levels between countries that export similar types of commodities, it is less compelling in terms of explaining the price differences between low and high income countries, as these countries typically export dissimilar types of commodities.

Suggested Citation

  • Turan Subasat, 2010. "Can Balassa and Samuelson effect explain the international price disparity between low and high income countries?," Economics Bulletin, AccessEcon, vol. 30(3), pages 2495-2504.
    • Handle: RePEc:ebl:ecbull:eb-10-00078
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    File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I3-P229.pdf
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    Keywords

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    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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