When in India, Get a Haircut

Imagine you’re traveling through India when you stop for a quick haircut. Would you pay more or less than you’d pay for a haircut in the U.S.?

While the price of tradable goods such as say, an iPhone, may remain relatively constant between countries, the price of services can vary quite a bit. In fact, a haircut in India could cost you less than $1.00!

In this video, Alex Tabarrok discusses the Balassa-Samuelson effect, purchasing power parity corrections, arbitrage, labor mobility, and why all of this is important when comparing the GDP and living standards of different countries.