Trade · 6 pages · 12 min
The Balassa-Samuelson account says high productivity in traded goods lifts wages, including wages in local services.
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The story says that a country highly productive at making traded goods pays high wages in that sector. Those wages spill into nontraded services such as haircuts, so services cost more in the richer, more productive economy. The opening covers traded productivity lifts wages, service wages are pulled along, and haircut prices then rise.
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