Consumer Price Index (CPI) follow the tradable
-versus-nontradable pattern: tradable
goods and services have lower inflation, and nontradable ones have higher inflation.
The next section describes the tradable
and nontradable parts of the economy.
This is why the data actually contradict Spence's inference that incomes in the tradable
sector have mirrored value-added growth and thus outpaced income growth in the rest of the economy.
Normalizing the price of tradables
to 1 and denoting the price of non-tradable
goods by [p.
To prove data consistency for Table 3, Figure 10 presents the share of tradables
produced in the economy together with the three RER indices.
Yotopoulos says his idea probably hasn't been advanced before because it was so difficult to measure how much tradable
and nontradable prices are off from their "real value.
Finally, initial movements in tradables
prices can induce additional effects, such as changing inflation expectations and wage demands.
Using data from the International Comparison Program and the Penn World Tables (international statistical programs sponsored by the World Bank and the Organization for Economic Cooperation and Development), they demonstrate that a clear positive relationship exists between prices in a given country and the country's per capita income--for all goods and for tradable
Note also that for Rwanda the labour share is much lower in the urban tradable
sector than for Egypt, consistent with similar production technology but much lower wage rates in Rwanda.
The higher the required volume of the tradable
goods production, the greater the initial price discrepancy between the relative price tradables
in terms of non-tradables
(which are mainly goods, but includes some services) are those that are imported or that are produced domestically but compete against imports, such as household furnishings.
By the law of one price, the prices of tradables
tend to get equalised across countries, while the prices of non-tradables