Market Integration and Transport Costs in France 1825-1903: A Threshold Error Correction Approach to the Law of One Price
AbstractThis paper argues that the appropriate standard for the analysis of commodity market integration is the transport cost adjusted law of one price. A threshold error correction model that incorporates that property is developed and applied to French wheat prices in the 19th century. This type of modelling acknowledges the fact that error corrections only take place when price differentials between markets exceed transport costs. The method used generates more accurate estimates of the adjustment speed to eqilibrium price differentials between markets and transport costs, which turn out to have a good fit with observed costs. Unlike previous studies this paper shows that French wheat markets were well integrated by the middle of the 19th century.
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Bibliographic InfoArticle provided by Elsevier in its journal Explorations in Economic History.
Volume (Year): 37 (2000)
Issue (Month): 2 (April)
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Web page: http://www.elsevier.com/locate/inca/622830
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- Mette Ejrnæs & Karl Gunnar Persson, 1998. "Market Integration and Transport Costs in France 1825-1903: A Threshold Error Correction Approach to the Law of One Price," Discussion Papers 98-19, University of Copenhagen. Department of Economics.
- N73 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Europe: Pre-1913
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
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