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Price Convergence in the European Union: Within Firms or Composition of Firms?

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  • Isabelle Méjean

    (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X)

  • Cyrille Schwellnus

    (OECD - Economics Department and CEPII)

Abstract

In this paper we use data on French export prices at the disaggregated firm and product level to evaluate the effect of economic integration on price convergence. We use the European integration ‘experiment' and firm-level data on export prices to distinguish between two possible margins of adjustment: At the intensive margin economic integration induces different pricing strategies within the firm, whereas at the extensive margin it affects the composition of firms with different pricing strategies. In our sample price convergence is 40 percent faster in the European Union than in an appropriately defined control group. 30 percent of this effect can be attributed to the fact that a higher share of firms with a low propensity to price discriminate serve European markets.

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number hal-00354190.

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Date of creation: Jan 2009
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Handle: RePEc:hal:wpaper:hal-00354190

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Keywords: Price convergence; Firm heterogeneity; European integration;

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Cited by:
  1. Bernard, Andrew B. & van Beveren, Ilke & Vandenbussche, Hylke, 2012. "Concording EU Trade and Production Data over Time," CEPR Discussion Papers 9254, C.E.P.R. Discussion Papers.
  2. Philippe Andrade, 2010. "Competition and Pass-through on international markets: Firm-level evidence from VAT shocks," 2010 Meeting Papers 820, Society for Economic Dynamics.
  3. Huang, Ho-Chuan (River) & Liu, Wei-Han & Yeh, Chih-Chuan, 2012. "Convergence in price levels across US cities," Economics Letters, Elsevier, vol. 114(3), pages 245-248.
  4. Julien Martin, 2010. "Markups, Quality and Transport Costs," Working Papers 2010-17, Centre de Recherche en Economie et Statistique.
  5. Isabelle Méjean & Julien Martin, 2010. "Euro et dispersion des prix à l’exportation," Économie et Statistique, Programme National Persée, vol. 435(1), pages 49-64.
  6. Eyal Dvir & Georg H. Strasser, 2013. "Does Marketing Widen Borders? Cross-Country Price Dispersion in the European Car Market," Boston College Working Papers in Economics 831, Boston College Department of Economics, revised 04 Apr 2014.
  7. Leon Podkaminer, 2013. "Persistent gaps between purchasing power parities and exchange rates under the law of one price: a puzzle (partly) explained?," Bank i Kredyt, National Bank of Poland, Economic Institute, vol. 44(4), pages 333-352.

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