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Do Regional Price Levels Converge?

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  • Christian Dreger

    ()
    (DIW Berlin)

  • Reinhold Kosfeld

    ()
    (University of Kassel)

Abstract

We investigate price level convergence on the base of regional data for 439 German districts. Prices refer to the overall consumer price index as well as to the index without housing prices. To increase the efficiency of the testing framework, the analysis is based on panel unit root tests. First and second generation tests are applied. They indicate a lack of regional price convergence, as the null hypothesis of a unit root is usually not rejected. The second generation tests reveal that the source of the unit root is likely common for all regions. The results are very similar for the overall regional price level and the measure without housing prices, and for the Western and Eastern part of the German economy. The elimination of housing prices is not sufficient to obtain a price index where tradables dominate. One rationale of our findings is the persistent west-east divide in consumer prices. A second argument is related to the persistence of the price gradient between urban and rural regions.

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Bibliographic Info

Article provided by Justus-Liebig University Giessen, Department of Statistics and Economics in its journal Journal of Economics and Statistics.

Volume (Year): 230 (2010)
Issue (Month): 3 (June)
Pages: 274-286

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Handle: RePEc:jns:jbstat:v:230:y:2010:i:3:p:274-286

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Related research

Keywords: Regional price differentials; price convergence; panel unit roots;

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References

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Cited by:
  1. Stefan Linz, 2010. "Regional Consumer Price Differences Within Germany Information Demand, Data Supply and the Role of the Consumer Price Index," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 230(6), pages 814-831, December.
  2. Timm Bönke & Carsten Schröder, 2011. "Poverty in Germany – Statistical Inference and Decomposition," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 231(2), pages 178-209, April.

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