SSE/EFI Working Paper Series in Economics and Finance
Demand and Distance: Evidence on Cross-Border Shopping
(), Marcus Asplund
() and Fredrik Wilander
Abstract: While many studies have documented deviations from the Law
of One Price in international settings, evidence is scarce on the extent to
which consumers take advantage of price differentials and engage in cross
border shopping. We use data from 287 Swedish municipalities to estimate
how responsive alcohol sales are to foreign prices, and relate the
sensitivity to the locationís distance to the border. Typical results
suggest that the elasticity with respect to the foreign price is around 0.4
in the border region; moving 200 (400) kilometers inland reduces it to 0.2
(0.1). Given that cross country price differences for alcohol and other
products are often caused by taxes, our evidence has implications for the
debate on tax competition/harmonization.
Keywords: Law of one price; tax competition; tax harmonization; cross border shopping; European integration.; (follow links to similar papers)
JEL-Codes: F15; H20; H77; R12; (follow links to similar papers)
23 pages, February 28, 2005
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- This paper is forthcoming as:
Friberg, Richard, Marcus Asplund and Fredrik Wilander, 'Demand and Distance: Evidence on Cross-Border Shopping', Journal of Public Economics.
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