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Common Russian Market: Myth rather than Reality

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  • Glushchenko Konstantin

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Abstract

This paper presents a theoretical argument that the relationship between price differences and per capita demand differences (approximated by per capita income differences) across locations can be used as a cross-sectional test of the law of one price. Since the relationship should be statistically insignificant or very weak in an integrated economy, its strength can measure the extent of market integration. Using this approach, the temporal pattern of Russia's internal market integration is characterized. The data used span 1992 – 1999, and cover most regions of the country; a number of consumer goods and aggregates are included in the analysis. The price-income relationship is found to be strong over the whole time span considered, thus indicating that the Russian market is not near to being integrated even in the present day. Nevertheless, integration tends to improve over time, though there are deviations from this tendency in 1997 and 1999. A number of culprits behind market fragmentation are identified, organized crime among them.

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Bibliographic Info

Paper provided by EERC Research Network, Russia and CIS in its series EERC Working Paper Series with number 01-11e.

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Length: 69 pages
Date of creation: 19 Aug 2002
Date of revision:
Handle: RePEc:eer:wpalle:01-11e

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Keywords: Russia; law of one price; market integration; price dispersion; Russian regions;

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References

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Citations

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Cited by:
  1. Gluschenko, Konstantin, 2002. "Market Integration in Russia During the Transformation Years," Economics Series 116, Institute for Advanced Studies.
  2. Konstantin Gluschenko, 2010. "Price convergence and market integration in Russia," William Davidson Institute Working Papers Series wp999, William Davidson Institute at the University of Michigan.
  3. Tsuruta, Yoshitaka, 2008. "What affects intranational price dispersion?: The case of Japanese gasoline prices," Japan and the World Economy, Elsevier, vol. 20(4), pages 563-584, December.
  4. Konstantin Gluschenko, 2004. "The Evolution of Cross-Region Price Distribution in Russia," William Davidson Institute Working Papers Series 2004-716, William Davidson Institute at the University of Michigan.
  5. Konstantin Gluschenko, 2008. "Goods Market Integration in Russia during the Economic Upturn," William Davidson Institute Working Papers Series wp921, William Davidson Institute at the University of Michigan.
  6. Глущенко К.П., 2007. "Влияние Организованной Преступности На Региональную Дифференциацию Цен," Журнал Экономика и математические методы (ЭММ), Центральный Экономико-Математический Институт (ЦЭМИ), vol. 43(2), апреÐ.
  7. Konstantin Gluschenko & Darya Karchevskaya (Kulighina), 2010. "Assessing a feasible degree of product market integration: a pilot analysis," Journal of Economic Studies, Emerald Group Publishing, vol. 37(4), pages 419-437, September.
  8. Konstantin Gluschenko, 2005. "Inter-Regional Price Convergence and Market Integration in Russia," International Advances in Economic Research, Springer, vol. 11(4), pages 483-483, November.
  9. Gluschenko, Konstantin, 2010. "The Law of One Price in the Russian Economic Space," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 17(1), pages 3-19.
  10. Akhmedjonov, Alisher & Lau, Chi Keung, 2012. "Do energy prices converge across Russian regions?," Economic Modelling, Elsevier, vol. 29(5), pages 1623-1631.

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