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Globalization and Price Dispersion: Evidence from U.S. Trade Flows

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  • John Tang

Abstract

Historically, the integration of international markets has corresponded with decreasing prices for traded goods due to higher competition among suppliers, scale economies, and consumption demand. In recent years, product differentiation and multinational firm pricing behavior across markets and between suppliers make it difficult to assess the degree to which this still occurs. Using a confidential panel dataset comprising the universe of U.S. import trade transactions between 1992 and 2007, this paper explores the change in prices for imported commodities across American trade partners. Overall price dispersion appears to decline, albeit unevenly, over time; nevertheless, there is considerable heterogeneity within commodity groups, geographic regions, and income levels, which may owe to increased product and quality differentiation within commodity categories. Unusually, after controlling for gravity trade factors, trade openness and extensive measures of globalization are positively associated with price dispersion, which suggests a more disaggregated approach both at the commodity and firm level to account for these differences.

Suggested Citation

  • John Tang, 2010. "Globalization and Price Dispersion: Evidence from U.S. Trade Flows," Working Papers 10-07, Center for Economic Studies, U.S. Census Bureau.
  • Handle: RePEc:cen:wpaper:10-07
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    File URL: https://www2.census.gov/ces/wp/2010/CES-WP-10-07.pdf
    File Function: First version, 2010
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    Cited by:

    1. Tang, John P., 2015. "Pollution havens and the trade in toxic chemicals: Evidence from U.S. trade flows," Ecological Economics, Elsevier, vol. 112(C), pages 150-160.

    More about this item

    Keywords

    price convergence; offshoring; product differentiation; multinational firm; law of one price;

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