Explaining time variation in geographic price dispersion

Dakshina De Silva, Inkoo Lee and Soon-Cheul Lee

Applied Economics, 2019, vol. 51, issue 42, 4629-4641

Abstract: The pattern of price dispersion significantly varies over time and across locations. Using a detailed dataset with product-level retail prices, we examine the role of time-varying factors in shaping the time variation of price dispersion. We find that price dispersion variation in an integrated region is mainly driven by oil prices, while the variation in a segmented region is attributed to dispersion in real income. We also find that dispersion in value-added tax rates explains a significant portion of price dispersion fluctuations in both geographic dimensions. This paper offers new evindence on the trade-off that exists for the role of time-varying factors as contributors to price dispersion variation by highlighting their relative importance across different dimensions of economic geography.

Date: 2019
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DOI: 10.1080/00036846.2019.1593941

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