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Article
Why are nontraded goods cheaper in poor countries?
International Review of Economics and Finance
  • Yoonho Choi, Simpson College
  • Hailong Jin, South Dakota State University
  • E. Kwan Choi, Iowa State University
Document Type
Article
Publication Version
Accepted Manuscript
Publication Date
3-28-2018
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.

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 International
Copyright Owner
Elsevier Inc.
Language
en
File Format
application/pdf
Citation Information
Yoonho Choi, Hailong Jin and E. Kwan Choi. "Why are nontraded goods cheaper in poor countries?" International Review of Economics and Finance (2018)
Available at: http://works.bepress.com/ekwan-choi/23/