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Wage Differential, the Price of Services and Welfare

Wage Differential, the Price of Services and Welfare

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A three-goods general equilibrium model is developed to examine the effect of economic growth on the price of services and welfare for poor and rich countries. The presence of intersectoral wage differentials provides an alternative explanation for the lower price of services in poor countries. The price of services is shown to play a central role in determining the welfare effect of economic growth.

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