TY  - JOUR
AU  - Bergin,Paul
AU  - Glick,Reuven
AU  - Taylor,Alan M.
TI  - Productivity, Tradability, and the Long-Run Price Puzzle
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10569
PY  - 2004
Y2  - June 2004
UR  - http://www.nber.org/papers/w10569
L1  - http://www.nber.org/papers/w10569.pdf
N1  - Author contact info:
Paul Bergin
Department of Economics
University of California, Davis
One Shields Ave.
Davis, CA 95616
Tel: 530/752-8398
Fax: 530/752-9382
E-Mail: prbergin@ucdavis.edu

Reuven Glick
Economic Research Department
Federal Reserve Bank of San Francisco
101 Market Street
San Francisco, CA  94105
Tel: 415/974-3184
Fax: 415/974-2168
E-Mail: reuven.Glick@sf.frb.org

Alan M. Taylor
Department of Economics
University of Virginia
Monroe Hall
Charlottesville, VA 22903
Fax: (434) 982-2904
E-Mail: alan.m.taylor@virginia.edu
AB  - Long-run cross-country price data exhibit a puzzle. Today, richer countries exhibit higher price levels than poorer countries, a stylized fact usually attributed to the  Balassa- Samuelson' effect. But looking back fifty years, or more, this effect virtually disappears from the data. What is often assumed to be a universal property is actually quite specific to recent times. What might explain this historical pattern? We adopt a framework where goods are differentiated by tradability and productivity. A model with monopolistic competition, a continuum-of-goods, and endogenous tradability allows for theory and history to be consistent for a wide range of underlying productivity shocks.
ER  -