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Assessing a feasible degree of product market integration. (A pilot analysis)

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  • Gluschenko, Konstantin

    ()
    (Institute of Economics and Industrial Engineering of SB RAS, Novosibirsk,)

  • Kulighina, Darya

    (Novosibirsk State University)

Abstract

Perfect integration eludes the real world, so we suggest a realistic benchmark standard for judging the extent of market integration in various economies. We estimate the degree of integration in the US product market, widely acknowledged to be the most integrated among geographically large economies, so as to provide a reference for measuring Russian market integration. Prices for 27 grocery items across 29 cities of the United States in the first quarter of 2000 are used as empirical data. The estimated degree of integration turns out to be very close to values obtained for Russia for 2000. Apparently, market integration in Russia has in recent years moved toward conditions found in advanced market economies. The roles of other factors that could potentially cause segmentation of the US market are also analyzed.

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File URL: http://www.suomenpankki.fi/bofit_en/tutkimus/tutkimusjulkaisut/dp/Documents/dp0306.pdf
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Bibliographic Info

Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 3/2006.

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Length: 29 pages
Date of creation: 19 Apr 2006
Date of revision:
Publication status: Published in Journal of Economic Studies, 2010, pages 419-437.
Handle: RePEc:hhs:bofitp:2006_003

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Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
Phone: + 358 10 831 2268
Fax: + 358 10 831 2294
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Web page: http://www.suomenpankki.fi/bofit_en/
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Keywords: market integration; price dispersion; law of one price; United States; Russia;

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  1. David C. Parsley & Shang-Jin Wei, 1996. "Convergence to the Law of One Price Without Trade Barriers or Currency Fluctuations," NBER Working Papers 5654, National Bureau of Economic Research, Inc.
  2. Stephen G. Cecchetti & Nelson C. Mark & Robert J. Sonora, 2002. "Price Index Convergence Among United States Cities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 1081-1099, November.
  3. Charles Engel & John H. Rogers, 1995. "How wide is the border?," Research Working Paper 95-09, Federal Reserve Bank of Kansas City.
  4. Berkowitz, Daniel & DeJong, David N., 2003. "Regional integration: an empirical assessment of Russia," Journal of Urban Economics, Elsevier, vol. 53(3), pages 541-559, May.
  5. Konstantin Gluschenko, 2004. "Analysing changes in market integration through a cross-sectional test for the law of one price," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 9(2), pages 135-149.
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