Why Are Goods Cheaper in Rich Countries? Beyond the Balassa-Samuelson Effect

By: Podkaminer, Leon.

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BookSeries: wiiw Working Papers: 64Publisher: Wien : Wiener Institut für Internationale Wirtschaftsvergleiche (wiiw), 2010Description: 20 S., 2 Tables and 6 Figures, 30cm.Subject(s): relative prices | Balassa-Samuelson Effect | Engel Law | Almost Ideal Demand System | international consumption comparisons | structural changeCountries covered: European Unionwiiw Research Areas: Macroeconomic Analysis and Policy | Sectoral studiesClassification: O14 | D12 | D51 Online resources: Click here to access online Summary: Relative 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.

Holdings
Item type	Current library	Call number	Status	Date due	Barcode
Paper	WIIW Library	5.700/64 (Browse shelf(Opens below))	Available		1000010002130

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Relative 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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