GGDC Research Memorandum Nr. 124

Contents

Title: The relative price of services

Author(s): INKLAAR, Robert and Marcel P. Timmer

Abstract:  Relative GDP prices increase with rising income per capita, which is generally attributed to services being cheaper in poorer countries. In this paper we re-examine this based on a new set of PPPs for industry output. These are estimated in an augmented Geary-Khamis approach using prices for final goods, exports and imports. The resulting multilateral PPPs cover 35 industries in 42 countries for the year 2005. We find that the rising relative GDP prices are entirely due to the rapid rise in the output prices of non-market services. This seems related to that sector’s high labour intensity.

Date: February 2012 | Full text  | Dataset |