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The Harrod-Balassa-Samuelson Effect: A Survey of Empirical Evidence

Author

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  • Josip Tica

    () (Faculty of Economics and Business, University of Zagreb)

  • Ivo Družić

    () (Faculty of Economics and Business, University of Zagreb)

Abstract

The paper surveys empirical evidence on the Harrod-Balassa-Samuelson effect. The survey encompasses the published empirical work on the phenomenon since its (re)discovery in 1964. In total, 58 empirical papers are examined within a specialized analytical framework. The body of empirical evidence is synthesized through four major elements. The analysis starts with the ongoing controversy related to the name of the theory. This is followed by a presentation of the evolution of the theoretical and econometric model. It ends with an analysis of the results of the surveyed empirical studies. Results of the survey indicate that growing body of evidence definitely points towards professional rethinking about the significance of the Harrod-Balassa-Samuelson effect.

Suggested Citation

  • Josip Tica & Ivo Družić, 2006. "The Harrod-Balassa-Samuelson Effect: A Survey of Empirical Evidence," EFZG Working Papers Series 0607, Faculty of Economics and Business, University of Zagreb.
  • Handle: RePEc:zag:wpaper:0607
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    References listed on IDEAS

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    1. Paul R. Bergin & Reuven Glick & Alan M. Taylor, 2017. "Productivity, Tradability, and the Long-Run Price Puzzle," World Scientific Book Chapters,in: International Macroeconomic Interdependence, chapter 8, pages 211-248 World Scientific Publishing Co. Pte. Ltd..
    2. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584-584.
    3. Arratibel, Olga & Rodriguez-Palenzuela, Diego & Thimann, Christian, 2002. "Inflation dynamics and dual inflation in accession countries: a 'New Keynesian' perspective," Working Paper Series 0132, European Central Bank.
    4. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, January.
    5. Asea, Patrick K & Mendoza, Enrique G, 1994. "The Balassa-Samuelson Model: A General-Equilibrium Appraisal," Review of International Economics, Wiley Blackwell, vol. 2(3), pages 244-267, October.
    6. Bahmani-Oskooee, Mohsen & Nasir, Abm, 2001. "Panel Data and Productivity Bias Hypothesis," Economic Development and Cultural Change, University of Chicago Press, vol. 49(2), pages 395-402, January.
    7. Bahmani-Oskooee, Mohsen, 1992. "A Time-Series Approach to Test the Productivity Bias Hypothesis in Purchasing Power Parity," Kyklos, Wiley Blackwell, vol. 45(2), pages 227-236.
    8. Bahmani-Oskooee, Mohsen & Niroomand, Farhang, 1996. "A Reexamination of Balassa's Productivity Bias Hypothesis," Economic Development and Cultural Change, University of Chicago Press, vol. 45(1), pages 195-204, October.
    9. Bahmani-Oskooee, Mohsen & Rhee, Hyun-Jae, 1996. "Time-Series Support for Balassa's Productivity-Bias Hypothesis: Evidence from Korea," Review of International Economics, Wiley Blackwell, vol. 4(3), pages 364-370, October.
    10. Balassa, Bela, 1973. "Just How Misleading are Official Exchange Rate Conversions?: Comment," Economic Journal, Royal Economic Society, vol. 83(332), pages 1258-1267, December.
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    Cited by:

    1. Marjan Petreski, 2008. "To Fix Or To Float From Perspective Of Output Volatility And Vulnerability To Crisis," Journal Articles, Center For Economic Analyses, pages 9-24, June.
    2. An, Lian & Kim, Gil & Ren, Xiaomei, 2014. "Is devaluation expansionary or contractionary: Evidence based on vector autoregression with sign restrictions," Journal of Asian Economics, Elsevier, vol. 34(C), pages 27-41.
    3. Maican, Florin G. & Sweeney, Richard J., 2013. "Real exchange rate adjustment in European transition countries," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 907-926.
    4. Bordo, Michael D. & Choudhri, Ehsan U. & Fazio, Giorgio & MacDonald, Ronald, 2017. "The real exchange rate in the long run: Balassa-Samuelson effects reconsidered," Journal of International Money and Finance, Elsevier, vol. 75(C), pages 69-92.
    5. Claudio Loser & José Fajgenbaum, 2012. "A New Vision for Mexico 2042: Achieving Prosperity for All," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 4(2), pages 155-195, May.
    6. Frensch, Richard & Schmillen, Achim, 2011. "Can we identify Balassa-Samuelson effects with measures of product variety?," Economic Systems, Elsevier, vol. 35(1), pages 98-108, March.
    7. Harpaul Alberto Kohli & Y. Aaron Szyf & Drew Arnold, 2012. "Construction and Analysis of a Global GDP Growth Model for 185 Countries through 2050," Global Journal of Emerging Market Economies, Emerging Markets Forum, pages 91-153.
    8. Samuelson, Ralph D., 2014. "The unexpected challenges of using energy intensity as a policy objective: Examining the debate over the APEC energy intensity goal," Energy Policy, Elsevier, vol. 64(C), pages 373-381.
    9. Predrag Petrovic, 2012. "Harrod Balassa Samuelson effect and the role of distribution sector: an empirical case study of Serbia and EMU," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics, vol. 30(1), pages 57-87.
    10. Achim Schmillen, 2010. "Are Wages Equal Across Sectors of Production? A Panel Data Analysis for Tradable and Non-Tradable Goods," Working Papers 285, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
    11. Josip Funda & Gorana Lukiniæ & Igor Ljubaj, 2007. "Assessment of the Balassa-Samuelson Effect in Croatia," Financial Theory and Practice, Institute of Public Finance, vol. 31(4), pages 321-351.
    12. Stijn Claessens & M. Ayhan Kose, 2017. "Asset prices and macroeconomic outcomes: A survey," CAMA Working Papers 2017-76, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    13. da Silva Marcelo Eduardo Alves & Baerlocher Diogo & de Paiva Fonseca Henrique Veras, 2015. "Fiscal shocks, the real exchange rate and the trade balance: some evidence for emerging economies," The B.E. Journal of Macroeconomics, De Gruyter, vol. 15(2), pages 727-768, July.
    14. Mao, Rui & Yao, Yang, 2015. "Fixed exchange rate regimes, real undervaluation and economic growth," BOFIT Discussion Papers 23/2015, Bank of Finland, Institute for Economies in Transition.
    15. Rafael Puyana Martínez-Villalba, 2011. "El efecto Balassa-Samuelson en Colombia," DOCUMENTOS CEDE 007959, UNIVERSIDAD DE LOS ANDES-CEDE.
    16. Gómez Aguirre Mario & Rodríguez Chávez José Carlos, 2013. "El efecto Harrod-Balassa-Samuelson. El caso de México," Contaduría y Administración, Accounting and Management, vol. 58(3), pages 121-147, julio-sep.
    17. Gabor Oblath & Eva Palocz & David Popper & Akos Valentinyi, 2015. "Economic convergence and structural change in the new member states of the European Union Convergence in volumes, prices and the share of services, with implications for wage convergence: an expenditu," IEHAS Discussion Papers 1544, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    18. Takao Fujii & Yoichi Matsubayashi, 2016. "The Balassa-Samuelson Effect and the Labor Market in Japan F1977-2008," Discussion Papers 1626, Graduate School of Economics, Kobe University.
    19. Dumitru, Ionut & Jianu, Ionela, 2009. "The Balassa-Samuelson effect in Romania - The role of regulated prices," European Journal of Operational Research, Elsevier, vol. 194(3), pages 873-887, May.
    20. Rafael Puyana Martínez-Villaba, 2010. "El efecto Balassa-Samuelson en Colombia," Borradores de Economia 630, Banco de la Republica de Colombia.
    21. Lorenzo Garlappi & Jack Favilukis, 2015. "The Carry Trade and UIP when Markets are Incomplete," 2015 Meeting Papers 242, Society for Economic Dynamics.
    22. Peltonen, Tuomas & Sager, Michael, 2009. "Productivity shocks and real exchange rate: a reappraisal," Working Paper Series 1046, European Central Bank.
    23. Rui Mao & Yang Yao, 2016. "Fixed Exchange Rate Regimes, Real Undervaluation, and Economic Growth," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 7(02), pages 1-35, June.
    24. Rafael Puyana, 2010. "El efecto Balassa-Samuelson en Colombia," BORRADORES DE ECONOMIA 007801, BANCO DE LA REPÚBLICA.

    More about this item

    Keywords

    Harrod Balassa Samuelson effect; real exchange rate; purchasing power parity; productivity;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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