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We derive two key propositions of the Balassa-Samuelson model as long-run balanced growth implications of a neoclassical general equilibrium model. The propositions are that productivity differentials determine international differences in nontradable relative prices and deviations from PPP reflect differences in nontradable prices. Closed-form solutions are obtained and tested using panel methods applied to long-run components of OECD sectoral data computed using the Hodrick-Prescott filter. The results indicate that labor productivity differentials help explain international low-frequency differences in relative prices. However. predicted nontradable relative prices are less successful in explaining long-run deviations from PPP."Unless very sophisticated indeed, PPP is a misleadingly pretentious doctrine, promising us what is rare in economics, detailed numerical predictions." (Paul A. Samuelson, 1964, p, 153)

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