University of California, Davis
Department of Economics
NBER Working Papers and Publications
|February 2017||What is the Price of Tea in China? Towards the Relative Cost of Living in Chinese and U.S. Cities|
with Robert C. Feenstra, Alexis Antoniades: w23161
We examine the price and variety of products at the barcode level in cities within China and the United States. In both countries, there is a greater variety of products in larger cities. But in China, unlike the United States, the prices of products tend to be lower in larger cities. We attribute the lower prices to a pro-competitive effect, whereby large cities attract more firms which leads to lower markups and prices. Combining the effect of greater variety and lower prices, it follows that the cost of living for grocery-store products in China is lower in larger cities. We further compare the cost-of-living indexes for particular product categories between China and the United States. In product categories with a significant presence of U.S. brands in the Chinese market, the availabil...