De Silva, Dakshina G. and Lee, I. and Lee, S.-C. (2019) Explaining time variation in geographic price dispersion. Applied Economics, 51 (42). pp. 4629-4641. ISSN 0003-6846
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Abstract
The pattern of price dispersion significantly varies over time and across locations. Using a detailed dataset with product-level retail prices, we examine the role of time-varying factors in shaping the time variation of price dispersion. We find that price dispersion variation in an integrated region is mainly driven by oil prices, while the variation in a segmented region is attributed to dispersion in real income. We also find that dispersion in value-added tax rates explains a significant portion of price dispersion fluctuations in both geographic dimensions. This paper offers new evindence on the trade-off that exists for the role of time-varying factors as contributors to price dispersion variation by highlighting their relative importance across different dimensions of economic geography.