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Abstract

This paper exploits the unique experiment of European market integration to investigate the relationship between integration and price convergence in international markets. Using a panel data set of car prices we examine how the process of integration has affected cross-country price dispersion in Europe. We find surprisingly strong evidence of convergence towards both the absolute and the relative versions of Purchasing Power Parity. Our analysis illuminates the main sources of segmentation in international markets and suggests the type of institutional changes that can successfully reduce it.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8402.

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Date of creation: Jul 2001
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Handle: RePEc:nbr:nberwo:8402

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Find related papers by JEL classification:

• F0 - International Economics - - General
• L0 - Industrial Organization - - General

This paper has been announced in the following NEP Reports:

• NEP-ALL-2001-07-30 (All new papers)
• NEP-EEC-2001-07-30 (European Economics)
• NEP-IFN-2001-07-30 (International Finance)

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