This paper examines the evolution of the relative price between tradable and nontradable goods in a group of European countries. A model of an open economy is used to analyze different factors that can account for an increase in the relative price of nontradable goods. These factors are: (a)...

Using 1970-85 sectoral data for the OECD we find that inflation in nontradable good exceeds inflation in tradables. We identify a demand shift towards nontradables and faster growth of total factor productivity in the tradable goods sector as the prime causes of the differential inflation. In...

It is argued that taxation causes three kinds of deadweight losses and two types of direct costs. The deadweight losses arise from substitution, evasion, and avoidance activities while the direct costs are administrative and compliance costs. Some of these social costs tend to be discontinuous...