Price Differences, Market Segmentation and China Provincial Border Effect--Based on Empirical Analysis of Regression Disco
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| Title | Price Differences, Market Segmentation and China Provincial Border Effect--Based on Empirical Analysis of Regression Disco
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| Author | Huang Xinfei and Chen Shanshan |
| Organization | Internationl Business School，Sun Yat-sen University；Institute for Economics，Sun Yat-sen University |
| Email | huangxf3@mail.sysu.edu.cn chenshanshan_1989@163.com |
| Key Words | Price Difference of Microeconomic Goods; Market Segmentation; Border Effect; Regression Discontinuity |
| Abstract | "Law of One Price" theory framework, which is often used to estimate border effect, is established on the assumption of market integration, but the assumption is not necessarily held in fact. And empirical studies have problems of aggregation bias and sample selection bias. This paper selected weekly price data of nine kinds of agricultural products in 183 farmers markets of 13 cities in the Yangtze River Delta Region from May 2011 to September 2013, combined market segmentation analysis into theoretical study, then use Regression Discontinuity to infer the causal relationship between border and price and re-examine China's provincial border effect. The empirical results show that: (1) Price difference comes from both cost fluctuation and profit fluctuation. Cross-border price spread is greater than non-cross-border price spread, which means border makes the deviation from Law of One Price more serious. (2) Border effect is still significant after controlling market demand characteristics. Shanghai-Zhejiang border effect is 103.4%, Shanghai-Jiangsu 68.9%, Jiangsu-Zhejiang 25.3%, and the border effects of different agricultural products are significantly different. (3) Cross-border market segmentation is still serious, so our border effect estimates only reflect the lower bound of border effect distribution. Our Regression Discontinuity Design is valid. |
| Serial Number | WP684 |
| Time | 2014-09-04 |
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