This paper investigates the Balassa-Samuelson effect for nine CEE transition countries Duval, Romain, “Taux de change réel et effet Balassa-Samuelson. 1The Balassa-Samuelson model (BS hereafter) has achieved workhorse status in the analysis of trends observed in industrialized countries regarding the. By Sylviane Guillaumont Jeanneney and Ping Hua; L’effet Balassa-Samuelson et les différences d’inflation entre les provinces chinoises.
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RePEc uses bibliographic data supplied by the respective publishers. Corrections All material on this site has been provided by the respective publishers and authors. Most professional economists accept that the Balassa—Samuelson effect model has some merit.
The Balassa—Samuelson hypothesis is the proposition that this can be explained by the greater variation in productivitybetween developed and less developed countries, in the traded goods’ sectors than in the non-tradable sectors. Yves Bourdet and Hans Falck have studied the effect of Cape Verde remittances on the traded-goods sector. In order to protect domestic producers import barriers are raised, allowing the local price for the traded good to rise beyond the international price.
Evidence from Korea”, Review of International Economics4 3: Retrieved from ” https: In total, since it was re discovered inaccording to Tica and Druzic  the HBS theory “has been tested 60 times in 98 countries in time series or panel analyses and in countries in cross-country analyses. Please note that corrections may take a couple of weeks to filter through the various RePEc services.
This results in southern pubs incurring a higher labour cost per pint served. The average asking price for a house in a prosperous city can be ten times that of an identical house in a depressed area of the same country.
If wealthy countries feel more able to protect their native producers than developing nations e. Therefore, the RER -deviation exists independent of what happens to the nominal exchange rate which is always 1 for areas sharing the same currency.
Balassa–Samuelson effect – Wikipedia
This explanation is similar to the BS-effect, since an industry needing protection must be measurably less productive in the world market of the commodity it produces.
For instance, other effects of exchange rate movements might mask the long-term BS-hypothesis mechanism making it harder to detect if it exists.
The effect had previously been hypothesized in the first edition of Roy Forbes Harrod ‘s International Economicspp.
Even without Free trade it may be harder to increase the productivity in the service sector as rapidly as in mass-production, so if money exchange rates are still based on the output of mass production the differentials in price level could still be caused by the Balassa—Samuelson effect. In this model, there has been no change in real economy productivities, but money price productivity in traded goods has been exogenously lowered through currency appreciation.
General contact details of provider: This is because services tend to be superior goodswhich are consumed proportionately more heavily at higher incomes.
Refinements to the econometric techniques and debate about alternative models are continuing in the International economics community. However, the essence of the Balassa—Samuelson mechanism would still remain: The next section lists some of the alternative proposals to an explanation of the Penn effectbut there are significant econometric problems with testing the BS-hypothesis, and the lack of strong evidence for it between modern economies may not refute it, or imply that it produces a small effect.
A Survey of Empirical Evidence” — via ideas. Other mechanisms through which RERs can affect productivity growth have been advanced, such as the idea that structural transitions caused by exchange rate volatility have a disruptive effect on the real economy. Note that this is not necessary, just sufficient, to produce the Penn effect. A Reappraisal”, Journal of Political Economy72 6: However, this reasoning is slightly different from the pure BS-hypothesis, because the goods being produced are ‘traded-goods’, even though protectionist measures mean that they are more expensive on the domestic market than the international market, so they will not be ” traded ” internationally .
Lessons from Singapore”, China Economic Review10 2: Since capital inflow is associated with high-income states e. Dans cet article, en employant des donnees construites a partir de la base de donnees sectorielles internationales ISDB publiee par l’OCDE 14 pays,nous degageons trois faits stylises complementaires, contraires a la theorie, dont les deux premiers trouvent une premiere confirmation econometrique.
This allows to link your profile to this item. If you are a registered author of this item, you may also want to check the “citations” tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation. The BS-hypothesis explanation for the price differentials is that the ‘productivity’ of pub employees in pints served per hour is more uniform than the ‘productivity’ in foreign currency earned per year of people working in the dominant tradable sector in each region of the country financial services in the south of England, manufacturing in the north.
Taux de change reel et effet Balassa-Samuelson
There is some econometric evidence that the causality balaassa exchange rates to productivity is more significant than the reverse, i. The simplest model which generates a Balassa—Samuelson effect has two countries, two goods one tradable, and a country specific nontradable and one factor of production, labor. A shift in preferences at the microeconomic level, caused by an income effect can change the make-up of the consumer price index to include proportionately more expenditure on services.
Taux de change reel et effet Balassa-Samuelson.
L’effet Balassa-Samuelson et les différences d’inflation entre les provinces chinoises
Almost balwssa cross-section tests confirm the model, while panel data results confirm the model for the majority of countries included in the tests. So with a same world price for tradable goods, the price of nontradable goods will be lower in the less productive country, resulting in an overall lower price level.
The supply-side economists and others have argued that raising International competitiveness through policies that promote traded goods sectors’ productivity at the expense of other sectors will increase a nation’s GDPand increase its standard of livingwhen compared with treating the sectors equally.
The export sector of the Cape Verde economy suffered a similar fall in productivity during the same period, which was caused entirely by capital flows and not by the BS-effect. Over time, the testing of the HBS model has evolved saamuelson dramatically. Rudi Dornbusch and others say that income rises can change the ratio of demand for goods and services tradable and non-tradable sectors. However most services must be delivered locally e.
This page was last edited on 17 Septemberat Porter ‘s The Competitive Advantage of Nations says that currency depreciations can reduce growth, and that ‘overvalued’ currencies can contribute to domestic productivity growth by ‘forcing’ efficiency improvements in the tradables sector by exposing it to international competition at unfavourable terms of trade.