Talk:Balassa-Samuelson effect

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Need a simple example. I think an island potato market might be a good example, as this can equate to a real observation. I'm working on this, here's what I have so far:

[edit] A simplified story explaining the effect

There are four separate goods in this story: Main land acres, island acres, main land potatos and island potatos, but here we have the key distinction: potatos are a tradable, interchangable commodity. Therefore, there are three distinct goods, giving two prices: i & m. i is the number of potatos per acre on the island, and m the bag/acre mainland price. The exchange rate, e = i/m. At the start of the story, productivity per acre is 1.

...

Of course, in the real world, the serfs will have little motivation to improve productivity since the gain will accrue entirely to the owners. This is one reason why Irish tenant farmers were carful not to make improvements, which may have contributed to the Irish potato famine. [This is ambiguous: You are saying that improvements would have contributed to the Irish potato famine, but I don't think that is what you mean.]

After this, the sections must be re-organised.

Wragge 02:11, 2005 Apr 15 (UTC)

Short lived famine is usually caused by weather/crop disease/war devastation. Perhaps other example would fit better. Pavel Vozenilek 23:02, 15 Apr 2005 (UTC)

Don't worry - I don't plan to use famine as an example, just allude to it after the example. Also, I have split the original page in half, the empirical text is on Penn effect now. Wragge 01:24, 2005 Apr 16 (UTC)