Why International Price Structures Differ
The important work of Kravis, Heston, and Summers (1982) not only gives estimates of the ‘real’ income of the various countries investigated, but also gives a detailed price structure of consumption and investment goods. They found these price structures to be fundamentally different, and neoclassical international trade theory is not able to explain the differences observed. It is intended here to propose a theoretical explanation of this phenomenon that not only does justice to the detailed information thus brought to light, but also is in agreement with the known economic history of the rich and poor countries of our planet.
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