Do gasoline prices converge in a unified Europe with non- harmonized tax rates?

Axel Dreher () and Tim Krieger

International Finance from EconWPA

Abstract: The paper presents univariate and panel unit root tests for gasoline and oil price convergence over the last decade. We test for the absolute versus relative version of the LOOP and estimate the speed of convergence as well as its development over time. Our results show that the absolute version of the LOOP cannot be supported. Constant price differences between countries remain, caused mainly by existing tax differences. The relative version of the LOOP is strongly supported by the data. The speed of convergence increased over time, but differs for gross and net-of-tax prices. We can show that national tax policy by EU member states is not (yet) threatened by arbitrage due to cross-border shopping.

Keywords: price convergence; law of one price; gasoline; international taxation; European integration; panel unit roots (search for similar items in EconPapers)
JEL-codes: H7 F15 Q48 C2 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn and nep-pbe
Date: 2004-11-09
Note: Type of Document - pdf; pages: 29
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Related works:
Working Paper: Do gasoline prices converge in a unified Europe with non-harmonized tax rates? (2005)
Working Paper: Do gasoline prices converge in a unified Europe with non-harmonized tax rates? (2004)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpif:0411005

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