Size and welfare costs of price differences across European countries

Christian Rühl

VfS Annual Conference 2016 (Augsburg): Demographic Change from Verein für Socialpolitik / German Economic Association

Abstract: Studies employing micro price data suggest that price dispersion is larger between regions in different countries than between regions in the same country. To investigate the strength of this border effect, deviations from the law of one price are used in most studies to provide statistical evidence on the effect of borders on price dispersion. I propose an alternative measure of the economic costs of borders which has an explicitwelfare-theoretic foundation. Employing a unique micro price data set from households in Belgium, Germany and the Netherlands I provide evidence on the economic importance of price differences for households. I find that price dispersion within countries has only small economic importance, but that price dispersion between Belgium andGermany (and Belgium and theNetherlands) has considerable economic importance.

JEL-codes: D12 F00 F40 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-eur and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc16:145701

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