The Relative Price of Nontraded Goods and Sectoral Total Factor Productivity: An Empirical Investigation

Vikas Kakkar

39 citations0/0 files storedThe Review of Economics and Statistics

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Monetary Policy and Economic Impact Global trade and economics Economic Growth and Productivity

Abstract

This paper examines the relationship between the relative price of nontraded goods and sectoral total factor productivities (TFPs) in the context of the Balassa-Samuelson model. With perfect capital mobility internationally and perfect factor mobility domestically, the relative price of nontraded goods is predicted to be independent of preferences over traded and nontraded goods, and completely determined by TFPs in the traded- and nontraded-goods sectors. Panel cointegration and unit root tests, applied to a panel of fourteen OECD economies, indicate that the relative price of nontraded goods and the labor-share-adjusted TFP differential are cointegrated with the unit cointegration vector.

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References

1987Co-Integration and Error Correction: Representation, Estimation, and Testing 1979Distribution of the Estimators for Autoregressive Time Series with a Unit Root 1988Testing for a Unit Root in Time Series Regression 1988Statistical analysis of cointegration vectors 2003Testing for unit roots in heterogeneous panels 1957Technical Change and the Aggregate Production Function 1991Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models 1979Distribution of the Estimators for Autoregressive Time Series With a Unit Root

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