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Global price dispersion: are prices converging or diverging?

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  • Paul R. Bergin
  • Reuven Glick

Abstract

This paper documents significant time-variation in the degree of global price convergence over the last two decades. In particular, there appears to be a general U-shaped pattern with price dispersion first falling and then rising in recent years, a pattern which is remarkably robust across country groupings and commodity groups. This time-variation is difficult to explain in terms of the standard gravity equation variables common in the literature, as these tend not to vary much over time or have not risen in recent years. However, regression analysis indicates that this time-varying pattern coincides well with oil price fluctuations, which are clearly time-varying and have risen substantially since the late 1990s. As a result, this paper offers new evidence on the role of transportation costs in driving international price dispersion.

Suggested Citation

  • Paul R. Bergin & Reuven Glick, 2006. "Global price dispersion: are prices converging or diverging?," Working Paper Series 2006-50, Federal Reserve Bank of San Francisco.
  • Handle: RePEc:fip:fedfwp:2006-50
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    References listed on IDEAS

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    1. Corsetti, Giancarlo & Dedola, Luca, 2005. "A macroeconomic model of international price discrimination," Journal of International Economics, Elsevier, vol. 67(1), pages 129-155, September.
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    Cited by:

    1. Anthony Landry & Mario Crucini, 2010. "Accounting for Real Exchange Rates using Micro-Data," 2010 Meeting Papers 1100, Society for Economic Dynamics.
    2. Christina Christou & Juncal Cunado & Rangan Gupta, 2016. "Price Convergence Patterns across U.S. States," Working Papers 201629, University of Pretoria, Department of Economics.
    3. Andrade, Philippe & Zachariadis, Marios, 2016. "Global versus local shocks in micro price dynamics," Journal of International Economics, Elsevier, vol. 98(C), pages 78-92.
    4. Michael Clemens, 2010. "A Labor Mobility Agenda for Development," Working Papers 201, Center for Global Development.
    5. David von Below & Pierre-Louis Vézina, 2016. "The Trade Consequences of Pricey Oil," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 64(2), pages 303-318, June.
    6. Parsley, David & Wei, Shang-Jin, 2008. "In search of a euro effect: Big lessons from a Big Mac Meal?," Journal of International Money and Finance, Elsevier, vol. 27(2), pages 260-276, March.
    7. M. A. Anderson & M. H. Davies & S. L. S. Smith, 2016. "Ethnic Networks and Price Dispersion," Review of International Economics, Wiley Blackwell, vol. 24(3), pages 514-535, August.
    8. Mario J. Crucini & Christopher I. Telmer, 2012. "Microeconomic Sources of Real Exchange Rate Variability," NBER Working Papers 17978, National Bureau of Economic Research, Inc.
    9. S. Brock Blomberg & Rozlyn C. Engel, 2012. "Lines in the Sand: Price Dispersion across Iraq's Intranational Borders before, during, and after the Surge," Journal of Law and Economics, University of Chicago Press, vol. 55(3), pages 503-538.
    10. David von Below & Pierre-Louis Vézina, 2016. "The Trade Consequences of Pricey Oil," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 64(2), pages 303-318, June.

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    Prices;

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