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Understanding Long-run Price Dispersion

  • Hakan Yilmazkuday

    ()

    (Department of Economics, Florida International University)

  • Mario J. Crucini

    ()

    (Department of Economics, Vanderbilt University)

A unique panel of retail prices spanning 123 cities in 79 countries from 1990 to 2005 is used to uncover the novel properties of long-run international price dispersion. At the PPP level, almost all of price dispersion is attributed to unskilled wage dispersion. At the level of individual goods and services, the average contribution of these wages is signi?cantly reduced, ref?ecting that good-speci?c sources of price dispersion, such as trade costs and good-specifi?c markups, tend to average out across goods. At the LOP level, borders and distance contribute about equally to price dispersion that is rising in the distribution share.

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File URL: http://economics.fiu.edu/research/working-papers/2014/1407/1407.pdf
File Function: First version, 2014
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Paper provided by Florida International University, Department of Economics in its series Working Papers with number 1407.

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Length: 33 pages
Date of creation: Apr 2014
Date of revision:
Handle: RePEc:fiu:wpaper:1407
Contact details of provider: Postal: Miami, FL 33199
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Web page: http://economics.fiu.edu

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  1. Burstein, Ariel & Eichenbaum, Martin & Rebelo, Sergio, 2007. "Modeling exchange rate passthrough after large devaluations," Journal of Monetary Economics, Elsevier, vol. 54(2), pages 346-368, March.
  2. Mario J. Crucini & Mototsugu Shintani, 2006. "Persistence in Law-of-One-Price Deviations: Evidence from Micro-data," Levine's Bibliography 321307000000000311, UCLA Department of Economics.
  3. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584.
  4. George Alessandria & Joseph Kaboski, 2007. "Pricing-to-market and the failure of absolute PPP," Working Papers 07-29, Federal Reserve Bank of Philadelphia.
  5. Peter Kennedy, 2003. "A Guide to Econometrics, 5th Edition," MIT Press Books, The MIT Press, edition 5, volume 1, number 026261183x, June.
  6. Engel, C. & Rogers, J.H., 1995. "How Wide is the Border?," Papers 4-95-16, Pennsylvania State - Department of Economics.
  7. Mario J. Crucini & Hakan Yilmazkuday, 2009. "A Model of International Cities: Implications for Real Exchange Rates," NBER Working Papers 14834, National Bureau of Economic Research, Inc.
  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. Burstein, Ariel T. & Neves, Joao C. & Rebelo, Sergio, 2003. "Distribution costs and real exchange rate dynamics during exchange-rate-based stabilizations," Journal of Monetary Economics, Elsevier, vol. 50(6), pages 1189-1214, September.
  10. Mario J. Crucini & Anthony Landry, 2012. "Accounting for real exchange rates using micro-data," Globalization and Monetary Policy Institute Working Paper 108, Federal Reserve Bank of Dallas.
  11. Ariel Burstein & Martin Eichenbaum & Sergio Rebelo, 2004. "Large Devaluations and the Real Exchange Rate," RCER Working Papers 513, University of Rochester - Center for Economic Research (RCER).
  12. Sanyal, Kalyan K & Jones, Ronald W, 1982. "The Theory of Trade in Middle Products," American Economic Review, American Economic Association, vol. 72(1), pages 16-31, March.
  13. Berthold Herrendorf & Akos Valentinyi, 2005. "Which Sectors Make the Poor Countries so Unproductive?," IEHAS Discussion Papers 0519, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  14. Mario J. Crucini & Chris I. Telmer & Marios Zachariadis, 2005. "Understanding European Real Exchange Rates," American Economic Review, American Economic Association, vol. 95(3), pages 724-738, June.
  15. George Alessandria, 2004. "International Deviations From The Law Of One Price: The Role Of Search Frictions And Market Share," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(4), pages 1263-1291, November.
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