International Price Dispersion and the Direction of Trade

The importance of trade costs in segmenting product markets cannot be captured by considering aggregate prices or in the absence of information on the direction of trade. We address this problem by utilizing product-specific prices along with cross-sectional productivity measures and bilateral trade flows that allow us to identify the probable source of any one product. Our empirical approach is in line with the theoretical framework of Eaton and Kortum (2002) and the variation of this proposed in Anderson and van Wincoop (2004). The data are shown to be consistent with this framework. In particular, trade costs in the form of transportation and distribution costs are important in determining international price differences and segmenting international markets.segmented markets, trade costs, transport costs, distribution costs, market size, international price dispersion.

Determinants of Public Health Outcomes: A Macroeconomic Perspective

This paper investigates the nature of the aggregate production function of health services. We build a model to analyze the role of public policy in determining social health outcomes, taking into account households choices concerning education, health related expenditures and saving. In the model, education has a positive external effect on health outcomes. Next, we perform an empirical analysis using a data set covering 80 countries from 1961 to 1995. We find strong evidence for a dual role of education as a determinant of health outcomes. In particular, we find that society’s tertiary education attainment levels contribute positively to how many years an individual should expect to live, in addition to the role that basic education plays for life expectancy at the individual household level. This finding uncovers a key externality of the educational sector on the ability of society to take advantage of best practices in the health service sector.Education, life expectancy, external effects, absorptive capacity.

Longevity and Education: A Macroeconomic Perspective

This paper investigates the determinants of longevity at a macroeconomic level, emphasizing the important role played by education. To analyze the determinants of longevity, we build a model where households intentionally invest in health and education, and where education exerts external effects on longevity. Performing an empirical analysis using data across 71 countries, we find that society’s tertiary education attainment rate is important for longevity, in addition to any role that basic education plays for life expectancy at the individual level. This finding uncovers a key externality of education, consistent with the theoretical hypothesis advanced in our macroeconomic model.Education, life expectancy, health, externalities, absorptive capacity, welfare

Global Versus Local Shocks in Micro Price Dynamics

A number of recent papers point to the importance of distinguishing between the price reaction to micro and macro shocks in order to reconcile the volatility of individual prices with the observed persistence of aggregate inflation. We emphasize instead the importance of distinguishing between global and local shocks. We exploit a panel of 276 micro price levels collected on a semi-annual frequency from 1990 to 2010 across 88 cities in 59 countries around the world, that enables us to distinguish between different types (local and global) of micro and macro shocks. The persistence associated with each of these components and its relation with volatility of the different components, provides a number of new facts. Prices respond more slowly to global shocks as compared to local ones .in particular, prices respond faster to local macro shocks than to global micro ones .implying that the relatively slow response of prices to macro shocks documented in recent studies comes from global rather than local sources. In addition, more volatility in local conditions leads to more persistent relative price distortions due to slower response of prices to global shocks, with this local -global link more than twice as large as the corresponding micro-macro link. Finally, global shocks account for half of the volatility in prices. Overall, our results imply that global shocks are important when analyzing price dynamics or assessing price-setting models.global shocks, local shocks, micro shocks, macro shocks, price adjustment, micro-macro gap, price-setting models, micro prices

Trends in International Prices

We exploit the panel dimension of a price levels dataset for more than one hundred product items across 140 cities in 90 countries for the period from 1990 to 2009 in order to improve our understanding of international price dispersion and the evolution of prices over time. We consider a panel data model with exchangeable units that allows for the possibility of common components for different dimensions of the panel. This allows one to gauge the contribution of each dimension of the data to total variation and to disentangle the sources of potential non-stationarity. It also allows us to identify differences in the speed of convergence for different time-varying components in response to location-specific, product-specific, and idiosyncratic shocks. Finally, we proceed to identify the economic determinants of different components to show that particular dimensions of the data are more suited for examining particular theories.Price levels, Variance decomposition, Convergence, Non-stationarity, International price dispersion