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The law of one price: intranational evidence for Canada

Author

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  • Janet Ceglowski
Abstract
This study investigates the behaviour of intranational prices for 45 specific consumer goods across 25 Canadian cities. It finds positive roles for distance and provincial borders in intercity price disparities. While sizable, the provincial border effect is an order of magnitude smaller than the estimates for the Canada‐U.S. border. A majority of the intercity relative price series are stationary around small mean values, indicating that long‐run price differences are close to zero. The intercity prices converge at rates considerably faster than the consensus estimates for international prices. In fact, half‐lives for intercity price deviations average well under a year. JEL Classification: F15, F31 La loi d’un seul prix : résultats intra‐nationaux pour le Canada Ce mémoire examine le comportement des prix intra‐nationaux de 45 biens de consommation spécifiques dans 25 villes canadiennes. Il semble que la distance et les frontières inter‐provinciales ont un impact sur les différentiels de prix entre villes.Même si l’impact des frontières inter‐provinciales est important, il est beaucoupplus petit que l’impact de la frontière Canada‐ U.S. Une majorité des séries de prix relatifs entre villes sont stationnaires autour de petites valeurs moyennes, ce qui suggère que les différences de prix à long terme s’approchent de zéro. Il est clair que les prix entre villes convergent à des taux considérablement plus rapides que ce qu’on observe au niveau international. En fait les déviations de prix entre villes ont une espérance de vie qui en moyenne est de moins d’un an.

Suggested Citation

  • Janet Ceglowski, 2003. "The law of one price: intranational evidence for Canada," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 36(2), pages 373-400, May.
    • Handle: RePEc:wly:canjec:v:36:y:2003:i:2:p:373-400
    DOI: 10.1111/1540-5982.t01-1-00005
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    References listed on IDEAS

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    1. John F. Helliwell & Geneviève Verdier, 2001. "Measuring internal trade distances: a new method applied to estimate provincial border effects in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 34(4), pages 1024-1041, November.
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    More about this item

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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