Scandinavian Working Papers in Economics

Working Papers,
University of Aarhus, Aarhus School of Business, Department of Economics

No 03-19: An empirical analysis of gasoline price convergence for 20 OECD countries

Jan Bentzen ()
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Jan Bentzen: Department of Economics, Aarhus School of Business, Postal: Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark

Abstract: Two decades have passed now since the oil price shocks of the 1970s and since then energy prices have - apart from short periods of price instability - evolved relatively smoothly in the industrialized countries. Energy taxes in many countries differ markedly thereby causing differences in final energy prices, but as similar tax levels are becoming more common, e.g. in the European Union, convergence concerning energy prices might be expected to appear. In the present paper national gasoline price data covering the time period since the 1970s for a sample of OECD countries are used in order to test for this often addressed topic of convergence. The empirical part of the paper applies different time series based tests of convergence, where gasoline prices exhibit convergence for most OECD-Europe countries in the case where US$ is used for measurement of the energy prices indicating a convergence or tax harmonization process is taking place for these countries.

Keywords: Gasoline prices; Price convergence; Gasoline tax harmonization

JEL-codes: Q40

27 pages, January 28, 2003

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