Understanding International Price Differences Using Barcode Data

Christian Broda and David Weinstein

No 14017, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The empirical literature in international finance has produced three key results about international price deviations: borders give rise to flagrant violations of the law of one price, distance matters enormously for understanding these deviations, and most papers find that convergence rates back to purchasing power parity are inconsistent with the evidence of micro studies on nominal price stickiness. The data underlying these results are mostly comprised of price indexes and price surveys of goods that may not be identical internationally. In this paper, we revisit these three stylized facts using massive amounts of US and Canadian data that share a common barcode classification. We find that none of these three main stylized facts survive. We use our barcode level data to replicate prior work and explain what assumptions caused researchers to find different results from those we find in this paper. Overall, our work is supportive of simple pricing models where the degree of market segmentation across the border is similar to that within borders.

JEL-codes: F1 F15 F31 (search for similar items in EconPapers)
Date: 2008-05
New Economics Papers: this item is included in nep-cba, nep-int and nep-opm
Note: IFM ITI
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Citations: View citations in EconPapers (136)

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