Price Convergence and Market Integration in Russia

45 Pages Posted: 18 Dec 2010

See all articles by Konstantin Gluschenko

Konstantin Gluschenko

Institute of Economics and Industrial Engineering, Siberian Branch of the Russian Academy of Sciences; Department of Economics, Novosibirsk State University

Date Written: September 15, 2010

Abstract

After a period of growing disconnectedness of regional markets following the 1992 price liberalization in Russia, a process of improvement in market integration started since about 1994. This paper analyzes the spatial pattern of goods market integration in the country in 1994-2000, characterizing Russian regions into three states: integrated with a benchmark region, not integrated but tending toward integration with it, and not integrated and not tending toward integration. The standard AR(1) model serves to test for market integration. To capture a movement toward integration (price convergence), a nonlinear time series model with an asymptotically decaying trend is proposed. The results obtained suggest that only a bit more than one fifth of the Russian regions can be deemed not integrated and not tending toward integration with the benchmark region over 1994-2000.

Keywords: Law of one price, Price dispersion, Non-linear trend, Russian regions.

JEL Classification: C32, P22, R10, R15

Suggested Citation

Gluschenko, Konstantin, Price Convergence and Market Integration in Russia (September 15, 2010). William Davidson Institute Working Paper No. 999, Available at SSRN: https://ssrn.com/abstract=1726056 or http://dx.doi.org/10.2139/ssrn.1726056

Konstantin Gluschenko (Contact Author)

Institute of Economics and Industrial Engineering, Siberian Branch of the Russian Academy of Sciences ( email )

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