Scandinavian Working Papers in Economics
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Institute for Economies in Transition, Bank of Finland BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland

No 3/2006:
Assessing a feasible degree of product market integration. (A pilot analysis)

Konstantin Gluschenko () and Darya Kulighina

Abstract: Perfect integration eludes the real world, so we suggest a realistic benchmark standard for judging the extent of market integration in various economies. We estimate the degree of integration in the US product market, widely acknowledged to be the most integrated among geographically large economies, so as to provide a reference for measuring Russian market integration. Prices for 27 grocery items across 29 cities of the United States in the first quarter of 2000 are used as empirical data. The estimated degree of integration turns out to be very close to values obtained for Russia for 2000. Apparently, market integration in Russia has in recent years moved toward conditions found in advanced market economies. The roles of other factors that could potentially cause segmentation of the US market are also analyzed.

Keywords: market integration; price dispersion; law of one price; United States; Russia; (follow links to similar papers)

JEL-Codes: F14; F15; L81; R11; (follow links to similar papers)

29 pages, April 19, 2006

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This paper is published as:
Gluschenko, Konstantin and Darya Karchevskaya (Kulighina), (2010), 'Assessing a feasible degree of product market integration: a pilot analysis', Journal of Economic Studies, Vol. 37, No. 4, pages 419-437

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