Why are goods so cheap in some countries?

Looking around the world, we observe substantial differences across countries in prices for most goods. These price differences also tend to be positively correlated with income differences, so that citizens of high-income countries tend to pay more for the same goods than citizens in low-income countries. In “Why Are Goods So Cheap in Some Countries?,” George Alessandria and Joseph Kaboski summarize some of the evidence related to the big price differences across countries for a broad set of goods. They then discuss the relationship between prices and income levels and some possible explanations for that relationship.