BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 13/2008:
Price convergence and geographic dimension of market integration: Evidence from China
Maria Ritola ()
Abstract: This study analyses the level and geographic dimension of
China's market integration. The objective is to provide a broad
characterization of China's market integration by performing a variety of
empirical tests and providing comparisons to other studies on the same
topic. The models tested are grounded in the law of one price. Price
convergence is analysed with univariate time series methods, where linear
and non-linear cointegration models refer to convergence in the short run
and in the long run, respectively. The non-linear model is considered a
good fit for analysing transitional economies, because the non-linear trend
variable in the model indicates whether there is movement towards
integration in the long run. Convergence of prices is first analysed by
comparing city-level prices with China's national average price level and
then by dividing China into three regional clusters. The estimation results
suggest that the level of integration across Chinese cities is fairly high
by international standards. The great majority of price series trending
towards integration are services. The geographic pattern of China's market
integration did not turn out as expected. Eastern cities are among the
least integrated cities in the nationwide examination. Relatively high
levels of integration were detected from several central and south-eastern
cities. Furthermore, the cluster convergence approach to analyse China's
market integration did not augment the eastern cities' level of
convergence.
Keywords: China; market integration; law of one price; price dispersion; regional clusters; convergence; (follow links to similar papers)
JEL-Codes: C12; C32; P22; R10; (follow links to similar papers)
37 pages, August 27, 2008
Before downloading any of the electronic versions below
you should read our statement on
copyright.
Download GhostScript
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
dp1308.pdf 
Download Statistics
Questions (including download problems) about the papers in this series should be directed to Päivi Määttä ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Programing by
Design by Joachim Ekebom
