TY - JOUR
T1 - Market Integration and Transport Costs in France 1825-1903
T2 - A Threshold Error Correction Approach to the Law of One Price
AU - Ejrnæs, Mette
AU - Persson, Karl Gunnar
N1 - JEL Classification: N73, C51
PY - 2000
Y1 - 2000
N2 - This article argues that the appropriate standard for the analysis of commodity market integration is the transport cost adjusted law of one price. A threshold error correction model that incorporates that property is developed and applied to French wheat prices in the 19th century. This type of modeling acknowledges the fact that error corrections only take place when price differentials between markets exceed transport costs. The method used produces estimates of implied transport costs, which are quite close to observed costs, and generates more accurate estimates of the adjustment speed to equilibrium price differentials between markets. Unlike previous studies this article shows that French wheat markets were well integrated by the middle of the 19th century
AB - This article argues that the appropriate standard for the analysis of commodity market integration is the transport cost adjusted law of one price. A threshold error correction model that incorporates that property is developed and applied to French wheat prices in the 19th century. This type of modeling acknowledges the fact that error corrections only take place when price differentials between markets exceed transport costs. The method used produces estimates of implied transport costs, which are quite close to observed costs, and generates more accurate estimates of the adjustment speed to equilibrium price differentials between markets. Unlike previous studies this article shows that French wheat markets were well integrated by the middle of the 19th century
U2 - 10.1006/exeh.2000.0733
DO - 10.1006/exeh.2000.0733
M3 - Journal article
SN - 0014-4983
VL - 37
SP - 149
EP - 173
JO - Explorations in Economic History
JF - Explorations in Economic History
IS - 2
ER -