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Market integration and convergence to the Law of One Price: evidence from the European car market

  • Goldberg, Pinelopi K.
  • Verboven, Frank

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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Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 65 (2005)
Issue (Month): 1 (January)
Pages: 49-73

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Handle: RePEc:eee:inecon:v:65:y:2005:i:1:p:49-73
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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  2. Papell, David H., 1997. "Searching for stationarity: Purchasing power parity under the current float," Journal of International Economics, Elsevier, vol. 43(3-4), pages 313-332, November.
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