Size and welfare costs of price differences across European countries

  • 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 explicit welfare-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 and Germany (and Belgium and the Netherlands) has considerable economic importance.

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Author:Christian Rühl
Parent Title (English):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 535
Series (Serial Number):CFS working paper series (535)
Publisher:Center for Financial Studies
Place of publication:Frankfurt, M.
Document Type:Working Paper
Year of Completion:2016
Year of first Publication:2016
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2016/10/18
Tag:border effects; goods market integration; international price dispersion; welfare effects
Edition:February 2016
Page Number:54
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht