China (and Inflation) Datapoint of the Day

Jim Surowiecki:

According to the Yale economist Peter K. Schott, machinery and electronics products made in developed countries sell in the U.S. for four times the average price of Chinese products. And, since the late nineteen-eighties, that price gap has widened by almost forty per cent.

Both of these datapoints astonish me, but the second more than the first, It speaks mainly, I think, to the astonishing advances in Chinese productivity, since there’s no doubt that the quality of Chinese exports has improved substantially over the past 20 years.

While we’re on the subject of eye-popping Surowiecki datapoints, here’s another, from the same column:

Broda and Romalis, in their recent paper, calculate that between 1999 and 2005 alone the inflation rate for lower-income Americans was almost seven points lower than it was for the wealthiest Americans.

Given where the CPI came in during those years, I’d guess this means noticeable-but-manageable inflation for the wealthy, alongside substantial deflation for the poor. Does this mean we should revisit all those statistics on real wage growth by income quintile, and run them again using CPI for that quintile?

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