Balassa-Samuelson effect

The Balassa-Samuelson effect is either of two related things: 1. The observation that consumer price levels in wealthier countries are systematically higher than in poorer ones. 2. An economic model predicting the above, based on the assumption that productivity or productivity growth-rates vary more by country in the traded goods' sectors than in other sectors. This article deals with point: Balassa and Samuelson's causal model. For a fuller description of the stylized fact it attempts to explain see: Penn effect.