
Penn Effect - hhs
https://en.wikipedia.org/wiki/Penn_effect
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ajuc
This is why I have a big problem with metric called "productivity".

Same service done in New York by the same worker is worth X times more than in
a small town. Hence people who move their shop suddenly become 10 times more
productive, even if they're doing the same thing exactly as efficiently as
before.

Then people look at the graphs and say "no wonder these poor places are
undeveloped - look how low their productivity is".

It should just be called labor cost and not productivity.

~~~
wodenokoto
Huh, I didn't know productivity was a measure of monetary production. I always
thought it was a catch all, for any and all alternative measures.

~~~
ajuc
It's defined as GDP/man-hours worked in the country in a year.

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tsmarsh
You can see this on a micro scale in Basel, CH. Buying bread in different
countries, just a short walk / bike ride with unenforced boundaries and there
are real price differences. For luxury goods it can be even more extreme with
Sushi on the french side of the border being affordable, and on the Swiss
side... less so.

You would think that the effect of the German and French markets would create
a local dip in prices in Basel, but it doesn’t seem to be true.

~~~
jstimpfle
What's true though is that Swiss people from the Basel region do regularly
cross the border to make their shopping trips - including groceries.

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jonny_eh
> The law of one price says that the same item cannot sustain two different
> sale prices in the same market (since everyone would buy only at the lower
> price).

This is currently a problem with digital goods. How can you sell something,
like an indie video game, for $1 in India and $10 is the US, and prevent
Americans from buying the Indian version? There are online marketplaces that
allow people to buy and sell "game keys" for cheap. People in cheap markets
can sell local keys for games, at a small markup, to people in expensive
markets.

~~~
echelon
I suppose one solution (for sellers) is to localize the games and their
translations and bake those into the game keys. Once one purchases a game in
Russian, you can't play it in English.

This excludes pricing disparity between (en-US, en-CA, en-GB), (es, es-US,
...) and the like cohorts, but that may not matter too much.

~~~
zeta0134
That would mean those of us who play games in multiple languages as a means of
language study would need to buy each game multiple times.

~~~
kgwgk
> play games in multiple languages as a means of language study

I've been studying all night, mom!

Seriously, those who read books in multiple languages as means of language
study need to buy each book multiple times and nobody used to find that
surprising...

~~~
OJFord
Or you just choose one? If you're at the level where reading a book can help
you learn more or practice, I wouldn't have thought you'd much want a second
copy in your native tongue.

~~~
kgwgk
Is an exercise common enough for bilingual editions to exist (intended to help
learning a language, not to better understand that particular book).

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tlb
What it doesn’t mention is that a Big Mac is really a combination of a product
(the price of which should be roughly constant) and the service of cooking and
serving it (which is priced relative to local labor and real-estate rates).

If you look at the price of pure products, like barrels of oil, there is
little Penn effect.

~~~
gmueckl
Not true. The Big Mac is mostly sourced regionally. So the raw material prices
also vary and factor in labor cost.

~~~
Dylan16807
> The Big Mac is mostly sourced regionally.

Only when it's cheaper to do so, and bulk shipping is pretty cheap. So the raw
material prices have a cap on how much they can vary, while the location and
service costs can have ridiculous differences.

~~~
retrac
You're assuming free trade, which is often not what actually exists. It's hard
enough to get American beef approved to be sold in Canada, let alone ship it
around the world.

~~~
Dylan16807
You could do extra certification or whatnot if it was going to save you more
than a penny or two.

Most trade is pretty free, even without all of it being so.

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habosa
Outsourcing is an interesting concept when considered this way. My employer
can hire me in Silicon Valley for $X or a remote engineer from Ukraine for
$Y<<$X.

Now clearly to the employer this is one big market where they have the choice
of two similar goods at very different prices. But the two employees are in
distinct but overlapping labor markets so they're not going to adjust their
own prices.

The employer has a choice of all employees but the reverse is not true. I
can't choose to work at a local Ukrainian firm and the other person can't
choose to work at a local Silicon Valley firm.

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i_am_proteus
This "effect" exists locally in California. Identical products are cheaper in
the Central Valley than they are in San Francisco, which makes perfect sense
considering that the "product" (if it is a hamburger) includes the convenience
of being immediately available in a high-rent high-wage area.

Similarly, Hass avocados from California retail for less in Baltimore than
they do in Oakland.

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nenadg
There is this thing called "regional prices" in online freelance labor marker,
which one could discuss is unfair to ie. workers from eastern Europe who earn
less that their western counterparts for the same job.

