Impact of Institutions on Cross-Border Price Dispersion
AbstractThis paper analyzes the role of institutions in price dispersion among cities in the European region in the 1996-2009 period. An overview of the literature on the border effect reveals that the role of institutions is completely neglected. Using the Worldwide Governance Indicators as explanatory variables I find that the better the institutions, the lower the predicted dispersion. The result is robust to different specifications of the regression model and it is consistent with a hypothesis that arbitrage, as an entrepreneurial activity and the main power behind the law of one price, is influenced by institutional quality.
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Bibliographic InfoPaper provided by Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies in its series Working Papers IES with number 2011/30.
Date of creation: Sep 2011
Date of revision: Sep 2011
border effect; price dispersion; price convergence; law of one price; institutional quality;
Other versions of this item:
- Jiří Schwarz, 2012. "Impact of institutions on cross-border price dispersion," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 148(4), pages 617-645, December.
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
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