Examples of tradable goods and services include most manufactured products, many agricultural products, a growing set of business and technical services, minerals, energy, and gas.
The boundary between the tradable and nontradable sectors is not fixed.
Tradable and nontradable parts of the economy also do not line up perfectly with conventional industry definitions.
Labour productivity in tradables increases from MP[L.
Although similar patterns of the relative wage of non-tradables in terms of tradables are observed in transition economies, it is instructive to look at labour market developments during the transition process in order to disentangle the working of the Balassa-Samuelson effect.
The dynamics of the ratio of labour employed in industry and services together with productivity differential broadly corresponds to the dynamics of the relative wage in the non-tradable sector measured in terms of tradables presented in Figure A1.
Thus, despite evidence that relative prices of non-tradables in central European economies have increased in line with the relative productivity of tradables, one should not jump to the conclusion that the Balassa-Samuelson effect has been present vis-a-vis the euro area.
All central European economies achieved higher productivity growth than the euro area in both tradables and--with the exception of the Czech Republic-non-tradables.
Second, one needs to distinguish carefully between empirical evidence that faster productivity growth in tradable industries contributes to rising relative prices of non-tradables (and hence domestic inflation) and evidence that productivity differentials widen the inter-country inflation differentials.
Balassa (1964) provided a formal framework to examine the relationship between economic growth and the equilibrium relative price of tradables to non-tradables, although Ricardo and others had earlier postulated a negative relationship between economic growth and the relative price of tradables to non-tradables.
Implicit in this is the assumption that growth is taking place in the tradables sector.
An overvaluation of the real exchange rate would be the outcome, and the pressures for devaluation would increase, given our old assumption of exogenous terms of trade, the price of tradables, and the rigidity of the nominal exchange rate,
Generally, fertiliser is considered tradable input in PAM analysis.
Indirect capital cost is estimated similar to labour after accounting for tradable inputs and capital costs of intermediate inputs.
The last input item of PAM budgets is tradable inputs.