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Russia’s common market takes shape: Price convergence and market integration among Russian regions

This paper analyzes the spatial structure of goods market integration in Russia, characterizing regions into three states: (a) integrated, (b) not integrated but trending toward integration, and (c) not integrated and not trending toward integration. Using time series of the cost of a staples basket across 75 regions of Russia for 1994-2000, I exploit a nonlinear cointegration relationship with an asymptotically subsiding trend to capture movement toward integration. The analysis suggests that 36% of Russian regions were integrated with the national market over 1994-2000, 44% were in the process of integrating with the national market, and 20% of regions were not integrated and not trending toward integration.

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File URL: http://www.suomenpankki.fi/bofit_en/tutkimus/tutkimusjulkaisut/dp/Documents/dp0706.pdf
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Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 7/2006.

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Length: 36 pages
Date of creation: 22 Jun 2006
Date of revision:
Publication status: Published as Gluschenko, Konstantin, 'Price convergence and market integration in Russia' in Regional Science and Urban Economics, 2011, pages 160-172.
Handle: RePEc:hhs:bofitp:2006_007
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Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland

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  1. Janet Ceglowski, 2003. "The law of one price: intranational evidence for Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 36(2), pages 373-400, May.
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  6. Berkowitz, Daniel & DeJong, David N., 2003. "Regional integration: an empirical assessment of Russia," Journal of Urban Economics, Elsevier, vol. 53(3), pages 541-559, May.
  7. MacKinnon, James G, 1996. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 601-18, Nov.-Dec..
  8. Bentzen, Jan, 2003. "An empirical analysis of gasoline price convergence for 20 OECD countries," Working Papers 03-19, University of Aarhus, Aarhus School of Business, Department of Economics.
  9. Gluschenko, Konstantin, 2004. "Nonlinearly testing for a unit root in the presence of a break in the mean," MPRA Paper 678, University Library of Munich, Germany, revised Sep 2005.
  10. Perron, P., 1989. "Testing For A Unit Root In A Time Series With A Changing Mean," Papers 347, Princeton, Department of Economics - Econometric Research Program.
  11. Berkowitz, Daniel & DeJong, David N. & Husted, Steven, 1998. "Quantifying Price Liberalization in Russia," Journal of Comparative Economics, Elsevier, vol. 26(4), pages 735-760, December.
  12. Andrei Shleifer & Daniel Treisman, 2003. "A Normal Country," Harvard Institute of Economic Research Working Papers 2019, Harvard - Institute of Economic Research.
  13. Gluschenko, Konstantin, 2011. "Price convergence and market integration in Russia," Regional Science and Urban Economics, Elsevier, vol. 41(2), pages 160-172, March.
  14. David C. Parsley & Shang-Jin Wei, 1996. "Convergence to the Law of One Price Without Trade Barriers or Currency Fluctuations," The Quarterly Journal of Economics, Oxford University Press, vol. 111(4), pages 1211-1236.
  15. Nahar, S. & Inder, B., 1998. "Testing Convergence in Economic Growth for OECD Countries," Monash Econometrics and Business Statistics Working Papers 14/98, Monash University, Department of Econometrics and Business Statistics.
  16. Bernard, Andrew B & Durlauf, Steven N, 1995. "Convergence in International Output," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(2), pages 97-108, April-Jun.
  17. Cushman, David O. & MacDonald, Ronald & Samborsky, Mark, 2001. "The law of one price for transitional Ukraine," Economics Letters, Elsevier, vol. 73(2), pages 251-256, November.
  18. Phillips, P C B, 1987. "Time Series Regression with a Unit Root," Econometrica, Econometric Society, vol. 55(2), pages 277-301, March.
  19. Glushchenko Konstantin, 2004. "Integration of the Russian Market. Empirical Analysis," EERC Working Paper Series 04-06e, EERC Research Network, Russia and CIS.
  20. Konstantin Gluschenko, 2004. "The Evolution of Cross-Region Price Distribution in Russia," William Davidson Institute Working Papers Series 2004-716, William Davidson Institute at the University of Michigan.
  21. Konstantin Gluschenko, 2010. "Anatomy of Russia's market segmentation," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 18(1), pages 27-58, 01.
  22. Glushchenko Konstantin, 2002. "Common Russian Market: Myth rather than Reality," EERC Working Paper Series 01-11e, EERC Research Network, Russia and CIS.
  23. Barry K. Goodwin & Thomas J. Grennes & Christine McCurdy, 1999. "Spatial price dynamics and integration in russian food markets," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 3(2), pages 157-193.
  24. Gluschenko, Konstantin, 2006. "Russia’s common market takes shape: Price convergence and market integration among Russian regions," BOFIT Discussion Papers 7/2006, Bank of Finland, Institute for Economies in Transition.
  25. Berkowitz, Daniel & DeJong, David N., 1999. "Russia's internal border," Regional Science and Urban Economics, Elsevier, vol. 29(5), pages 633-649, September.
  26. Konstantin Gluschenko, 2003. "Market integration in Russia during the transformation years," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 11(3), pages 411-434, 09.
  27. Gerald A. Carlino & Leonard O. Mills, 1993. "Testing neoclassical convergence in regional incomes and earnings," Working Papers 93-22, Federal Reserve Bank of Philadelphia.
  28. Daniel Berkowitz & David N. DeJong, 2001. "The evolution of market integration in Russia," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 9(1), pages 87-104, March.
  29. K.P.Glushcenko, 2002. "Econometric analysis of the degree of integration of the national market," Journal "Region: Economics and Sociology", Institute of Economics and Industrial Engineering of Siberian Branch of RAS, vol. 3, pages 67-87.
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