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

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  • Isabelle Méjean

    (Department of Economics, Ecole Polytechnique - Polytechnique - X - 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. Julien Martin, 2010. "Markups, Quality and Transport Costs," Working Papers 2010-17, Center for Research in Economics and Statistics.
    4. Eyal Dvir & Georg H. Strasser, 2013. "Does Marketing Widen Borders? Cross-Country Price Dispersion in the European Car Market," Boston College Working Papers in Economics 831, Boston College Department of Economics, revised 04 Apr 2014.
    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. Boumellassa, Houssein & Debucquet, David Laborde & Mitaritonna, Cristina, 2009. "A picture of tariff protection across the World in 2004: MAcMap-HS6, Version 2," IFPRI discussion papers 903, International Food Policy Research Institute (IFPRI).
    8. Martin, Julien, 2012. "Markups, quality, and transport costs," European Economic Review, Elsevier, vol. 56(4), pages 777-791.
    9. Thomas Sampson, 2017. "Brexit: The Economics of International Disintegration," CESifo Working Paper Series 6668, CESifo Group Munich.
    10. Thomas Sampson, 2017. "Brexit: The Economics of International Disintegration," CEP Discussion Papers dp1499, Centre for Economic Performance, LSE.
    11. 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.
    12. 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.
    13. 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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