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Market Integration and Transport Costs in France 1825-1903: A Threshold Error Correction Approach to the Law of One Price

Listed author(s):
  • Ejrnaes, Mette
  • Persson, Karl Gunnar

This paper argues that the appropriate standard for the analysis of commodity market integration is the transport cost adjusted law of one price. A threshold error correction model that incorporates that property is developed and applied to French wheat prices in the 19th century. This type of modelling acknowledges the fact that error corrections only take place when price differentials between markets exceed transport costs. The method used generates more accurate estimates of the adjustment speed to eqilibrium price differentials between markets and transport costs, which turn out to have a good fit with observed costs. Unlike previous studies this paper shows that French wheat markets were well integrated by the middle of the 19th century.

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File URL: http://www.sciencedirect.com/science/article/pii/S0014-4983(00)90733-2
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Article provided by Elsevier in its journal Explorations in Economic History.

Volume (Year): 37 (2000)
Issue (Month): 2 (April)
Pages: 149-173

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Handle: RePEc:eee:exehis:v:37:y:2000:i:2:p:149-173
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622830

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  1. Obstfeld, Maurice & Taylor, Alan M., 1997. "Nonlinear Aspects of Goods-Market Arbitrage and Adjustment: Heckscher's Commodity Points Revisited," Journal of the Japanese and International Economies, Elsevier, vol. 11(4), pages 441-479, December.
  2. Weir, David R., 1984. "Life Under Pressure: France and England, 1670–1870," The Journal of Economic History, Cambridge University Press, vol. 44(01), pages 27-47, March.
  3. Persson,Karl Gunnar, 1999. "Grain Markets in Europe, 1500–1900," Cambridge Books, Cambridge University Press, number 9780521650960, December.
  4. Flandreau, Marc, 1996. "Adjusting to the Gold Rush: Endogenous Bullion Points and the French Balance of Payments 1846-1870," Explorations in Economic History, Elsevier, vol. 33(4), pages 417-439, October.
  5. B.M. Roehner, 1994. "Les mécanismes d'interdépendance spatiale entre marchés du blé au XIXe siècle," Histoire, économie & société, Programme National Persée, vol. 13(2), pages 343-394.
  6. Chevet, Jean-Michel & Saint-Amour, Pascal, 1992. "L'intégration des marchés du blé en France aux XVIIIe et XIXe siècles," Cahiers d'Economie et de Sociologie Rurales (CESR), INRA (French National Institute for Agricultural Research), vol. 22.
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  1. Historical Economic Geography

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