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Price Convergence in the European Union: Within Firms or Composition of Firms?

Author

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  • Isabelle Méjean

    (Department of Economics, Ecole Polytechnique - X - École polytechnique - CNRS - Centre National de la Recherche Scientifique)

  • Cyrille Schwellnus

    (OECD - Economics Department and CEPII)

Abstract

In this paper we use data on French export prices at the disaggregated firm and product level to evaluate the effect of economic integration on price convergence. We use the European integration ‘experiment' and firm-level data on export prices to distinguish between two possible margins of adjustment: At the intensive margin economic integration induces different pricing strategies within the firm, whereas at the extensive margin it affects the composition of firms with different pricing strategies. In our sample price convergence is 40 percent faster in the European Union than in an appropriately defined control group. 30 percent of this effect can be attributed to the fact that a higher share of firms with a low propensity to price discriminate serve European markets.

Suggested Citation

  • Isabelle Méjean & Cyrille Schwellnus, 2009. "Price Convergence in the European Union: Within Firms or Composition of Firms?," Working Papers hal-00354190, HAL.
  • Handle: RePEc:hal:wpaper:hal-00354190
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00354190
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    Cited by:

    1. Huang, Ho-Chuan (River) & Liu, Wei-Han & Yeh, Chih-Chuan, 2012. "Convergence in price levels across US cities," Economics Letters, Elsevier, vol. 114(3), pages 245-248.
    2. Philippe Andrade, 2010. "Competition and Pass-through on international markets: Firm-level evidence from VAT shocks," 2010 Meeting Papers 820, Society for Economic Dynamics.
    3. Martin, Julien, 2012. "Markups, quality, and transport costs," European Economic Review, Elsevier, vol. 56(4), pages 777-791.
    4. Dvir, Eyal & Strasser, Georg, 2018. "Does marketing widen borders? Cross-country price dispersion in the European car market," Journal of International Economics, Elsevier, vol. 112(C), pages 134-149.
    5. Julien Martin & Isabelle Méjean, 2010. "Euro et dispersion des prix à l’exportation," Économie et Statistique, Programme National Persée, vol. 435(1), pages 49-64.
    6. Bernard, Andrew B. & van Beveren, Ilke & Vandenbussche, Hylke, 2012. "Concording EU Trade and Production Data over Time," CEPR Discussion Papers 9254, C.E.P.R. Discussion Papers.
    7. Thomas Sampson, 2017. "Brexit: The Economics of International Disintegration," CESifo Working Paper Series 6668, CESifo Group Munich.
    8. Ken Coutts & Graham Gudgin & Jordan Buchanan, 2018. "How the Economics Profession Got It Wrong on Brexit," Working Papers wp493, Centre for Business Research, University of Cambridge.
    9. Juan de Lucio & Raúl Mínguez & Asier Minondo & Francisco Requena, 2018. "The variation of export prices across and within firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 154(2), pages 327-346, May.
    10. Thomas Sampson, 2017. "Brexit: The Economics of International Disintegration," CEP Discussion Papers dp1499, Centre for Economic Performance, LSE.
    11. repec:bin:bpeajo:v:47:y:2016:i:2016-02:p:367-383 is not listed on IDEAS
    12. Sampson, Thomas, 2017. "Brexit: the economics of international disintegration," LSE Research Online Documents on Economics 86591, London School of Economics and Political Science, LSE Library.
    13. Martin, Julien & Mejean, Isabelle, 2013. "Price dispersion and the euro: Micro heterogeneity and macro implications," International Review of Economics & Finance, Elsevier, vol. 26(C), pages 70-86.
    14. Leon Podkaminer, 2013. "Persistent gaps between purchasing power parities and exchange rates under the law of one price: a puzzle (partly) explained?," Bank i Kredyt, Narodowy Bank Polski, vol. 44(4), pages 333-352.
    15. repec:cep:cepbxt:10 is not listed on IDEAS

    More about this item

    Keywords

    Price convergence; Firm heterogeneity; European integration;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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