Hoste, J., Verboven, F.

Uncovering the Sources of Geographic Market Segmentation: Evidence from the EU and the US

CWPE2402

Abstract: We develop a new approach to measure the sources of geographic goods market segmentation. Our cost-of-living approach uncovers the relative importance of price and product availability differences, while accounting for taste differences. We implement our methodology on regionally disaggregated consumer goods data in the EU and US. The analysis reveals that price, and especially, product availability differences are much larger between than within European countries, and are only marginally larger between than within US states. Our findings imply that US states are geographically integrated, whereas EU countries remain segmented, due to trade frictions that mainly relate to fixed costs.

Keywords: Geographic Market Integration, LOP Deviations, Product Availability Differences

JEL Codes: D12 F15 R32

Author links: Joris Hoste  

PDF: https://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe2402.pdf

Open Access Link: https://doi.org/10.17863/CAM.107465

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