The Market for Tractors in the EU: Price Differences and Convergence

Christian Jorgensen and Morten Persson

No 144005, Working papers from Factor Markets, Centre for European Policy Studies

Abstract: This study evaluates the degree of segmentation of the market for agricultural machinery and equipment in the EU. We focus on agricultural tractors, the most common and biggest investment in machinery and equipment in the agricultural sector. By using country price data for individual tractor models, we test the law of one price, i.e. the existence of a common price for tractors across EU member states. We find that significant price differences exist, yet unlike most other studies we find that large price deviations are penalised within a short time. The study also shows that transport costs are an important source of price differences, as domestic production leads to lower prices on the domestic market and as price convergence is negatively correlated with distance. Finally, price differences should not solely be understood from a geographical perspective, as evidence supports the idea that farmers’ buying power is significant in explaining price differences within countries.

Keywords: Demand and Price Analysis; Productivity Analysis (search for similar items in EconPapers)
Pages: 22
Date: 2013-01-15
New Economics Papers: this item is included in nep-agr
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:famawp:144005

DOI: 10.22004/ag.econ.144005

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