Product Variety, the Cost of Living, and Welfare across Countries
American Economic Journal: Macroeconomics
vol. 15,
no. 4, October 2023
(pp. 40-66)
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 and instead relying on output prices, openness, domestic trade costs, and product variety measured by the counts of barcodes or firms. We find that welfare relative to the United States is lower than indicated by real consumption for most countries, but similar in China and Japan and similar or higher in some European countries.Citation
Cavallo, Alberto, Robert C. Feenstra, and Robert Inklaar. 2023. "Product Variety, the Cost of Living, and Welfare across Countries." American Economic Journal: Macroeconomics, 15 (4): 40-66. DOI: 10.1257/mac.20210137Additional Materials
JEL Classification
- E21 Macroeconomics: Consumption; Saving; Wealth
- E23 Macroeconomics: Production
- E31 Price Level; Inflation; Deflation
- O11 Macroeconomic Analyses of Economic Development
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