IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Price Convergence in an Enlarged Internal Market

Listed author(s):
  • Christian Dreger
  • Konstantin Kholodilin
  • Kirsten Lommatzsch
  • Jiří Slačálek
  • Przemyslaw Wozniak

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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://hdl.handle.net/10.2753/EEE0012-8775460504
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Taylor & Francis Journals in its journal Eastern European Economics.

Volume (Year): 46 (2008)
Issue (Month): 5 (September)
Pages: 57-68

as
in new window

Handle: RePEc:taf:eaeuec:v:46:y:2008:i:5:p:57-68
DOI: 10.2753/EEE0012-8775460504
Contact details of provider: Web page: http://www.tandfonline.com/MEEE20

Order Information: Web: http://www.tandfonline.com/pricing/journal/MEEE20

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:taf: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)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.