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Russia's common market takes shape : price convergence and market integration among Russian regions

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  • Gluschenko, Konstantin

Abstract

This paper analyzes the spatial structure of goods market integration in Russia, characterizing regions into three states: (a) integrated, (b) not integrated but trending toward integration, and (c) not integrated and not trending toward integration.Using time series of the cost of a staples basket across 75 regions of Russia for 1994-2000, I exploit a nonlinear cointegration relationship with an asymptotically subsiding trend to capture movement toward integration.The analysis suggests that 36% of Russian regions were integrated with the national market over 1994-2000, 44% were in the process of integrating with the national market, and 20% of regions were not integrated and not trending toward integration. JEL classification: C32, P22, R10, R15 Keywords: market integration, law of one price, price dispersion, convergence, Russian regions.

Suggested Citation

  • Gluschenko, Konstantin, 2006. "Russia's common market takes shape : price convergence and market integration among Russian regions," BOFIT Discussion Papers 7/2006, Bank of Finland, Institute for Economies in Transition.
  • Handle: RePEc:bof:bofitp:2006_007
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    References listed on IDEAS

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    1. 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.
    2. 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.
    3. Cushman, David O. & MacDonald, Ronald & Samborsky, Mark, 2001. "The law of one price for transitional Ukraine," Economics Letters, Elsevier, vol. 73(2), pages 251-256, November.
    4. Konstantin Gluschenko, 2004. "The Evolution of Cross-Region Price Distribution in Russia," William Davidson Institute Working Papers Series 2004-716, William Davidson Institute at the University of Michigan.
    5. Whitney K. Newey & Kenneth D. West, 1994. "Automatic Lag Selection in Covariance Matrix Estimation," Review of Economic Studies, Oxford University Press, vol. 61(4), pages 631-653.
    6. Perron, Pierre, 1990. "Testing for a Unit Root in a Time Series with a Changing Mean," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(2), pages 153-162, April.
    7. Durlauf, Steven N. & Quah, Danny T., 1999. "The new empirics of economic growth," Handbook of Macroeconomics,in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 4, pages 235-308 Elsevier.
    8. Carlino, Gerald A. & Mills, Leonard, 1996. "Testing neoclassical convergence in regional incomes and earnings," Regional Science and Urban Economics, Elsevier, vol. 26(6), pages 565-590, December.
    9. MacKinnon, James G, 1996. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 601-618, Nov.-Dec..
    10. 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.
    11. Conway, Patrick, 1999. "Privatization and Price Convergence: Evidence from Four Markets in Kyiv," Journal of Comparative Economics, Elsevier, vol. 27(2), pages 231-257, June.
    12. K.P.Glushcenko, 2002. "Econometric analysis of the degree of integration of the national market," Journal "Region: Economics and Sociology", Institute of Economics and Industrial Engineering of Siberian Branch of RAS, vol. 3, pages 67-87.
    13. Glushchenko Konstantin, 2004. "Integration of the Russian Market. Empirical Analysis," EERC Working Paper Series 04-06e, EERC Research Network, Russia and CIS.
    14. Bruce L. Gardner & Karen M. Brooks, 1994. "Food Prices and Market Integration in Russia: 1992–93," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(3), pages 641-646.
    15. 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, September.
    16. K.P. Glushchenko & A.Yu. Koneva, 2004. "Integration of the national food market," Journal "Region: Economics and Sociology", Institute of Economics and Industrial Engineering of Siberian Branch of RAS, vol. 2.
    17. 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.
    18. Barry K. Goodwin & Thomas J. Grennes & Christine McCurdy, 1999. "Spatial price dynamics and integration in russian food markets," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 3(2), pages 157-193.
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    Citations

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    Cited by:

    1. Gluschenko, Konstantin, 2010. "The Law of One Price in the Russian Economic Space," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 17(1), pages 3-19.
    2. Hakan Yilmazkuday, 2013. "Inflation targeting, flexible exchange rates and inflation convergence," Applied Economics, Taylor & Francis Journals, vol. 45(5), pages 593-603, February.
    3. M. Ege Yazgan & Hakan Yilmazkuday, 2016. "High versus low inflation: implications for price-level convergence," Empirical Economics, Springer, vol. 50(4), pages 1527-1563, June.
    4. World Bank, 2011. "Russia : Reshaping Economic Geography," World Bank Other Operational Studies 13052, The World Bank.
    5. Ritola, Maria, 2008. "Price convergence and geographic dimension of market integration : Evidence from China," BOFIT Discussion Papers 13/2008, Bank of Finland, Institute for Economies in Transition.
    6. Konstantin Gluschenko, 2009. "Goods market integration in Russia during the economic upturn," Post-Communist Economies, Taylor & Francis Journals, vol. 21(2), pages 125-142.
    7. Konstantin Gluschenko, 2006. "Price Linkages of Russian Regional Markets," William Davidson Institute Working Papers Series wp839, William Davidson Institute at the University of Michigan.
    8. K.P. Glushchenko (glu@ieie.nsc.ru), 2010. "Methodologies of analyzing inter-regional income inequalities," Journal "Region: Economics and Sociology", Institute of Economics and Industrial Engineering of Siberian Branch of RAS, vol. 1.
    9. Konstantin Gluschenko, 2010. "Methodologies of Analyzing Inter-Regional Income Inequality and Their Applications to Russia," William Davidson Institute Working Papers Series wp984, William Davidson Institute at the University of Michigan.

    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • P22 - Economic Systems - - Socialist Systems and Transition Economies - - - Prices
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods

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