Long-run cross-country price data exhibit a puzzle. Today, richer countries exhibit higher price levels than poorer countries, a stylized fact usually attributed to the Balassa- Samuelson' effect. But looking back fifty years, or more, this effect virtually disappears from the data. What is...

This paper develops a two-country macro model with endogenous tradability to study features of international economic integration. Recent episodes of integration in Europe and North America suggest some surprising observations: while quantities of trade have increased significantly, especially...