The price of development: The Penn-Balassa-Samuelson effect revisited

• 成果类型: Article
• 署名作者: Hassan, Fadi
• 署名单位: Trinity College Dublin
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2016.07.009
• 发表日期: 2016
• 页码: 291-309
• 关键词: Penn effect; Balassa-Samuelson hypothesis; Developing countries; Real exchange rate; structural transformation

摘要

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 estimation and measurement error in low-income countries do not drive the result. Rather, the different stage of development between countries can explain this new finding. The paper shows that a model linking the price level to the process of structural transformation captures the non-monotonic pattern of the data. This provides additional understanding of real exchange rate determinants in developing countries. (C) 2016 Elsevier B.V. All rights reserved.