Penn effect
Observed phenomenon in economics / From Wikipedia, the free encyclopedia
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The Penn effect is the economic finding that commodity prices are higher in countries with higher income.
This is often interpreted to mean that real income ratios between high and low income countries are misrepresented by gross domestic product (GDP) conversion at market exchange rates. It is associated with what became the Penn World Table, and it has been a consistent econometric result since at least the 1950s.
However, the "Penn effect", even as Samuelson used it, refers to the general observation: there is correlation between higher price levels and higher per capita income.
The Balassa-Samuelson effect model arises from a project to confirm the result and explicate the cause within the neoclassical framework.