Price Dispersion: The Role of Borders, Distance and Location

We study deviations from the Law-of-One-Price using microeconomic data on the retail prices of approximately 220 individual goods and services across 122 cities located in 79 countries over the period from 1990 to 2000. This paper builds on our earlier work (Crucini, Telmer and Zachariadis (2001)) which focused on how price dispersion within a …xed geography (the European Union) varied by type of good or service. For example, in moving from the least traded good with the largest share of non-traded inputs into retail production (a haircut) to the most traded goods with the lowest share of non-traded inputs into retail production (a desk-top PC), the standard deviation of price across locations dropped from about 32% to 16%. Moreover, the median (and majority) of goods and services fell between these two extremes.