Assessing a feasible degree of product market integration: a pilot analysis
Purpose - This paper aims to make a preliminary estimate of the degree of integration in the US product market (widely acknowledged to be the most integrated among geographically large economies) as an upper bound of spatial integration that is practically achievable in markets covering fairly large territories. Design/methodology/approach - The approach takes the form of an econometric model derived from the fact that local price of a tradable good should not be dependent on local demand under the law of “one price is a tool to measure market integration”. It is applied to data on the cost of a grocery basket and prices for three individual goods in 2000 across 29 US cities. Findings - The regression results suggest that the US market is not perfectly integrated. Thus, the estimated degree of its integration can be deemed, indeed, as a feasible maximum. Applying this benchmark to the European part of Russia in 2000, its degree of market integration turns out to be comparable – by the order of magnitude – with the feasible one. The roles of a few factors that could potentially cause segmentation of the US market are estimated. Research limitations/implications - The estimated degree of US market integration is crude because of the relatively small spatial sample. Further research has to substantially widen the spatial sample and estimate integration of the US market across a number of points in time. Originality/value - The paper suggests a realistic benchmark standard for judging the extent of market integration in various (geographically large) economies.
Volume (Year): 37 (2010)
Issue (Month): 4 (September)
|Contact details of provider:|| Web page: http://www.emeraldinsight.com|
|Order Information:|| Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK|
Web: http://www.emeraldinsight.com/jes.htm Email:
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Glushchenko Konstantin, 2002. "Common Russian Market: Myth rather than Reality," EERC Working Paper Series 01-11e, EERC Research Network, Russia and CIS.
- Engel, Charles & Rogers, John H, 1996. "How Wide Is the Border?," American Economic Review, American Economic Association, vol. 86(5), pages 1112-1125, December.
- Charles Engel & John H. Rogers, 1994. "How Wide is the Border?," NBER Working Papers 4829, National Bureau of Economic Research, Inc.
- Engel, C. & Rogers, J.H., 1995. "How Wide is the Border?," Papers 4-95-16, Pennsylvania State - Department of Economics.
- Charles Engel & John H. Rogers, 1995. "How wide is the border?," Research Working Paper 95-09, Federal Reserve Bank of Kansas City.
- Charles Engel & John H. Rogers, 1995. "How wide is the border?," International Finance Discussion Papers 498, Board of Governors of the Federal Reserve System (U.S.).
- Engel, Charles & Rogers, John H, 2001. "Violating the Law of One Price: Should We Make a Federal Case Out of It?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(1), pages 1-15, February.
- Charles Engel & John H. Rogers, 1999. "Violating the Law of One Price: Should We Make a Federal Case Out of It?," NBER Working Papers 7242, National Bureau of Economic Research, Inc.
- Charles Engel & John H. Rogers, 2000. "Violating the Law of One Price: Should We Make a Federal Case Out of It?," Discussion Papers in Economics at the University of Washington 0027, Department of Economics at the University of Washington.
- Charles Engel & John H. Rogers, 1999. "Violating the law of one price: should we make a federal case out of it?," International Finance Discussion Papers 644, Board of Governors of the Federal Reserve System (U.S.).
- Charles Engel & John H. Rogers, 2000. "Violating the Law of One Price: Should We Make a Federal Case Out of It?," Working Papers 0027, University of Washington, Department of Economics.
- 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.
- Daniel Berkowitz & David N. DeJong, 2001. "The evolution of market integration in Russia," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 9(1), pages 87-104, March.
- Daniel Berkowitz & David N. DeJong, 2000. "The Evolution of Market Integration in Russia," William Davidson Institute Working Papers Series 334, William Davidson Institute at the University of Michigan.
- 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.
- Parsley, David C. & Wei, Shang-Jin, 2001. "Explaining the border effect: the role of exchange rate variability, shipping costs, and geography," Journal of International Economics, Elsevier, vol. 55(1), pages 87-105, October.
- David C. Parsley & Shang-Jin Wei, 2000. "Explaining the Border Effect: The Role of Exchange Rate Variability, Shipping Costs, and Geography," NBER Working Papers 7836, National Bureau of Economic Research, Inc.
- David C. Parsley & Shang-Jin Wei, 1996. "Convergence to the Law of One Price Without Trade Barriers or Currency Fluctuations," The Quarterly Journal of Economics, Oxford University Press, vol. 111(4), pages 1211-1236.
- 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.
- David Parsley Shang-Jin Wei, 2002. "Currency Arrangements And Goods Market Integration: A Price Based Approach," International Finance 0211004, EconWPA.
- Konstantin Gluschenko, 2003. "Market integration in Russia during the transformation years," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 11(3), pages 411-434, 09.
- Gluschenko, Konstantin, 2002. "Market Integration in Russia During the Transformation Years," Economics Series 116, Institute for Advanced Studies.
When requesting a correction, please mention this item's handle: RePEc:eme:jespps:v:37:y:2010:i:4:p:419-437. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Virginia Chapman)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.