Editing Balassa–Samuelson effect (section)

{{Short description|Tendency for consumer prices to be systematically higher in more developed countries}}
{{more footnotes|date=May 2022}}
The '''Balassa–Samuelson effect''', also known as '''Harrod–Balassa–Samuelson effect''' (Kravis and Lipsey 1983), the '''Ricardo–Viner–Harrod–Balassa–Samuelson–Penn–Bhagwati effect''' (Samuelson 1994, p.&nbsp;201), or productivity biased [[purchasing power parity]] (PPP) (Officer 1976) is the tendency for [[Consumer Price Index|consumer prices]] to be systematically higher in more [[developed countries]] than in [[less developed countries]]. This observation about the systematic differences in consumer prices is called the "[[Penn effect]]".  The '''Balassa–Samuelson hypothesis''' is the proposition that this can be explained by the greater variation in [[productivity]] between developed and less developed countries in the traded goods' sectors which in turn affects wages and prices in the non-tradable goods sectors. 

[[Béla Balassa]] and [[Paul Samuelson]] independently proposed the causal mechanism for the Penn effect in the early 1960s.