Catching-Up and Inflation in Transition Economies: The Balassa-Samuelson Effect Revisited

The Price of Development: the Penn-Balassa-Samuelson effect revisited∗

The Penn-Balassa-Samuelson effect is the stylized fact about the positive correlation between cross-country price level and per-capita income. This paper provides evidence that the price-income relation is actually non-linear and turns negative among low income countries. The result is robust along both cross-section and panel dimensions. Additional robustness checks show that biases in PPP est...

Balassa-Samuelson Effect in the CEECs?

This paper offers a detailed assessment of the Balassa-Samuelson (BS) effect in eight Central and Eastern European countries (CEEC8). Several features distinguish this study from others: First, we investigate a variety of specifications of extended models. Nonhomogeneity of wages, deviations from PPP in tradables and demand side variables are found to importantly contribute to explain inflation...

The Penn-Balassa-Samuelson Effect in Developing Countries: Price and Income Revisited

It is conventional wisdom that richer countries have a higher price level than poorer countries. This paper provides evidence that the price-income relationship is non-linear and that it turns negative, or at best flat, in low income countries. The result is robust along both cross-section and time-series dimensions. Additional robustness checks show that biases in PPP estimation and measuremen...

The Balassa-Samuelson Hypothesis in Developed Countries and Emerging Market Economies: Different Outcomes Explained

This paper studies the Balassa-Samuelson hypothesis in two areas with strong differences in economic development, sixteen OECD countries and sixteen Latin American economies. Applying panel cointegration and bootstrapping techniques that solve for cross-sectional dependence problems in the data, we find that the second stage of the hypothesis, which relates relative sector prices with the real ...

Productivity, the Terms of Trade, and the Real Exchange Rate: The Balassa-Samuelson Hypothesis Revisited