NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Market Integration and Convergence to the Law of One Price: Evidence from the European Car Market

Pinelopi K. Goldberg, Frank Verboven

NBER Working Paper No. 8402
Issued in July 2001
NBER Program(s):   IO   ITI

This paper exploits the unique experiment of European market integration to investigate the relationship between integration and price convergence in international markets. Using a panel data set of car prices we examine how the process of integration has affected cross-country price dispersion in Europe. We find surprisingly strong evidence of convergence towards both the absolute and the relative versions of Purchasing Power Parity. Our analysis illuminates the main sources of segmentation in international markets and suggests the type of institutional changes that can successfully reduce it.

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Document Object Identifier (DOI): 10.3386/w8402

Published: Goldberg, Pinelopi K. and Frank Verboven. "Market Integration And Convergence To The Law Of One Price: Evidence From The European Car Market," Journal of International Economics, 2005, v65(1,Jan), 49-73.

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