Exaggerated death of distance: Revisiting distance effects on regional price dispersions

Kazuko Kano, Takashi Kano, Kazutaka Takechi

Research output: Contribution to journalArticle

11 Citations (Scopus)

Abstract

This paper empirically establishes the significant roles of transport costs in price dispersions across regions. We identify and estimate the iceberg-type distance-elastic transport costs as a parameter of a structural model of cross-regional price differentials featuring product delivery decisions. Utilizing a data set of wholesale prices and product delivery patterns of agricultural products in Japan, our structural estimation approach finds large distance elasticities of the transport costs. The result confirms that geographical barriers are an economically significant contributor to the failures of the law of one price.

Original languageEnglish
Pages (from-to)403-413
Number of pages11
JournalJournal of International Economics
Volume90
Issue number2
DOIs
Publication statusPublished - 2013 Jul 1
Externally publishedYes

Keywords

  • Agricultural wholesale price
  • Geographical distance
  • Law of one price
  • Regional price dispersion
  • Sample-selection bias
  • Transport cost

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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