Campus Units

Economics

Document Type

Article

Publication Version

Accepted Manuscript

Publication Date

3-28-2018

Journal or Book Title

International Review of Economics and Finance

DOI

10.1016/j.iref.2018.03.022

Abstract

Balassa and Samuelson argued that production technologies differ among countries, and the price of the nontraded good is higher in countries with higher labor productivity. This paper shows that the Balassa-Samuelson effect exists even when countries share identical production technologies. In the celebrated Heckscher-Ohlin model, changes in factor endowments do not affect the equalized factor prices. This paper considers a three-factor, three-industry model, and demonstrates that endowment differences between countries can cause disparities in their wage rates and the prices of the nontraded good. A dynamic panel data analysis shows that a 10% increase in per capita real GDP results in a 2% increase in the housing price for non-EU OECD countries.

JEL Classification

F1, O1

Comments

This is a manuscript of an article published as Choi, Yoonho, Hailong Jin, and E. Kwan Choi. "Why are nontraded goods cheaper in poor countries?." International Review of Economics & Finance (2018). doi: 10.1016/j.iref.2018.03.022. Posted with permission.

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Copyright Owner

Elsevier Inc.

Language

en

File Format

application/pdf

Available for download on Thursday, March 28, 2019

Published Version

Share

COinS