IDEAS home Printed from https://ideas.repec.org/a/mes/eaeuec/v46y2008i5p57-68.html
   My bibliography  Save this article

Price Convergence in an Enlarged Internal Market

Author

Listed:
  • Christian Dreger
  • Konstantin Kholodilin
  • Kirsten Lommatzsch
  • JiÅí SlaÄálek
  • Przemyslaw Wozniak

Abstract

This paper investigates the effects of EU enlargement on price convergence. The internal market is expected to boost integration and increase efficiency and welfare through a convergence of prices in product markets. Two principal drivers are crucial to explain price developments. On one hand, higher competition exerts downward pressure on prices because of lower markups. On the other hand, the catching-up process of lowincome countries leads to a rise in price levels and higher inflation over a transition period. Using comparative price levels for forty-one product categories, price convergence can be established. However, the speed of convergence is rather slow, with half-lives of approximately ten years. The enlargement has stimulated convergence slightly toward the mean price; this effect is robust across different groups of countries. Moreover, the driving forces of convergence are explored. In line with theoretical predictions, the rise in competition exerts downward pressure on prices, whereas catching-up of low-income countries leads to a rise in price levels and higher inflation. The findings have important implications, as price convergence facilitates the working of common economic policies.

Suggested Citation

  • Christian Dreger & Konstantin Kholodilin & Kirsten Lommatzsch & JiÅí SlaÄálek & Przemyslaw Wozniak, 2008. "Price Convergence in an Enlarged Internal Market," Eastern European Economics, Taylor & Francis Journals, vol. 46(5), pages 57-68, September.
  • Handle: RePEc:mes:eaeuec:v:46:y:2008:i:5:p:57-68
    as

    Download full text from publisher

    File URL: http://mesharpe.metapress.com/link.asp?target=contribution&id=2127502U043713L8
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sascha S. Becker, 2011. "What Drives the Relationship Between Inflation and Price Dispersion? Market Power vs. Price Rigidity," SFB 649 Discussion Papers SFB649DP2011-019, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mes:eaeuec:v:46:y:2008:i:5:p:57-68. 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: (Chris Longhurst). General contact details of provider: http://www.tandfonline.com/MEEE20 .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.