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E pluribus unum? Political fractionalization and deviations from the law of one price in the USA
[Fractionalization]

Author

Listed:
  • Massimo Antonini
  • David Fielding
  • Jacinta Pires

Abstract

The magnitude of deviations from the Law of One Price (LOP) across cities depends on a number of characteristics, including language differences, distance, and other correlates of trade costs. We show that in the USA, political differences between cities are an equally important determinant of LOP deviations. LOP deviations are smaller if the cities are both strongly Democrat or both strongly Republican. These effects are of a similar order of magnitude to those of distance, and suggest that political differences represent a substantial barrier to competition.

Suggested Citation

  • Massimo Antonini & David Fielding & Jacinta Pires, 2022. "E pluribus unum? Political fractionalization and deviations from the law of one price in the USA [Fractionalization]," Oxford Economic Papers, Oxford University Press, vol. 74(1), pages 194-214.
    • Handle: RePEc:oup:oxecpp:v:74:y:2022:i:1:p:194-214.
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    File URL: http://hdl.handle.net/10.1093/oep/gpab007
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    Cited by:

    1. Stewart, Chris, 2023. "Re-evaluating whether absolute or relative purchasing power parity is being tested when using price indices," Economics Discussion Papers 2023-1, School of Economics, Kingston University London.

    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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