IDEAS home Printed from https://ideas.repec.org/a/fec/journl/v7y2012i1p94-121.html
   My bibliography  Save this article

Accounting for the ¡°Subnational Penn Effect¡±¡ªA General Theory of Regional and National Price Levels

Author

Listed:
  • Xiang Tang

    (School of Economics, Peking University, Beijing 100871, China)

Abstract

As an extension of the neoclassical urban systems theory (Henderson, 1974), we develop a general theory of regional (inter-city) price dispersion which also explains the ¡°subnational Penn effect,¡± i.e., cross-city correlations among population size, prices, real income and human capital stock. The model is also a theory of international price dispersion that is observationally equivalent to and more appealing than the Balassa-Samuelson theory, implying that the (international) Penn effect may simply be an aggregate result of the ¡°subnational Penn effect.¡± Furthermore, it shows that, contrary to the popular view, economic integration can increase as well as decrease spatial price variation.

Suggested Citation

  • Xiang Tang, 2012. "Accounting for the ¡°Subnational Penn Effect¡±¡ªA General Theory of Regional and National Price Levels," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 7(1), pages 94-121, March.
    • Handle: RePEc:fec:journl:v:7:y:2012:i:1:p:94-121
    as

    Download full text from publisher

    File URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-001-012-0005-7
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    regional price dispersion; Penn effect; Balassa-Samuelson; urban systems;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fec:journl:v:7:y:2012:i:1:p:94-121. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Frank H. Liu (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.