The Relative Price of Non‐traded Goods under Imperfect Competition* |
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| Authors: | Javier Coto‐Martinez Juan C Reboredo |
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| Institution: | 1. Department of Economics and Finance, Brunel University, Uxbridge, Middlesex UB8 3PH, UK (e‐mail: Javier.Coto-Martinez@brunel.ac.uk);2. Department of Economics, University of Santiago de Compostela, Avda. Xoán XXIII, S/N, 15782 Santiago de Compostela, Spain (e‐mail: juancarlos.reboredo@usc.es) |
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| Abstract: | We consider the role of imperfect competition in explaining the relative price of non‐traded to traded goods within the Balassa–Samuelson framework. Under imperfect competition in these two sectors, relative prices depend on both productivity and mark‐up differentials. We test this hypothesis using a panel of sectors for 12 OECD countries. The empirical evidence suggests that relative price movements are well explained by productivity and mark‐up differentials. |
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| Keywords: | F31 F36 C23 |
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