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  • American Economic Journal: Macroeconomics

Product Variety, the Cost of Living, and Welfare Across Countries

By: Alberto Cavallo, Robert C. Feenstra and Robert Inklaar
  • Format:Print
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Abstract

We use the structure of the Melitz (2003) model to compute the cost of living and welfare across 47 countries, and compare these to conventional measures of prices and real consumption from the International Comparisons Project (ICP). The cost of living is inferred without directly using ICP prices of traded goods, but instead relying on output prices, openness, domestic trade costs and product variety measured by the counts of barcodes or firms. We find that welfare is lower than indicated by real consumption for most countries, but similar in certain Asian countries and similar or higher in some European countries.

Keywords

Macroeconomics; Trade

Citation

Cavallo, Alberto, Robert C. Feenstra, and Robert Inklaar. "Product Variety, the Cost of Living, and Welfare Across Countries." American Economic Journal: Macroeconomics (forthcoming).

Supplemental Information

Replication Data and Code
Online Appendix
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About The Author

Alberto F. Cavallo

Business, Government and the International Economy
→More Publications

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