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Turan Subasat
''Can Balassa and Samuelson effect explain the international price disparity between low and high income countries?''
( 2010, Vol. 30 No.3 )
This article assesses the Balassa and Samuelson effect which offers an explanation of the differences in international prices based on productivity disparity between tradables and nontradables. It argues that although the Balassa and Samuelson effect provides a reasonable explanation for the deviations in price levels between countries that export similar types of commodities, it is less compelling in terms of explaining the price differences between low and high income countries, as these countries typically export dissimilar types of commodities.
Keywords: Balassa and Samuelson effect, international price disparity
JEL: E3 - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)
Manuscript Received : Feb 08 2010 Manuscript Accepted : Sep 27 2010

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