BALASSA-SAMUELSON EFFECT
Countries with higher wage and higher real exchange rates have high productivity growth. The effect postulates the rise in wages in the tradable foods sectors of an emerging economy also leads to higher wages in nontradable sector of that economy. Increase in inflation results to higher inflation rates in faster growing nations unlike in growing developed countries. Economists Bela Balassa and Paul Samuelson proposed this in 1963.
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