American Economic Review Vol. 101 No. 6 2011

International Prices, Costs, and Markup Differences

Gita Gopinath¹; Pierre‐Olivier Gourinchas²; Chang‐Tai Hsieh³; Nicholas Li⁴

¹ Department of Economics, Harvard University, Littauer Center 206, 1805 Cambridge Street, Cambridge, MA 02138. · ² Department of Economics, University of California at Berkeley, 691A Evans Hall 3880, Berkeley, CA 94720. · ³ Booth School of Business, University of Chicago, 5807 South Woodlawn Avenue, Chicago, IL 60637. · ⁴ Department of Economics, University of California at Berkeley, 508-1 Evans Hall 3880 3880, Berkeley, CA 94720.

Abstract

Relative cross-border retail prices, in a common currency, comove closely with the nominal exchange rate. Using product-level prices and wholesale costs from a grocery chain operating in the United States and Canada, we decompose this variation into relative costs and markup components. The high correlation of nominal and real exchange rates is driven mainly by changes in relative costs. National borders segment markets. Retail prices respond to changes in costs in neighboring stores within the same country but not across the border. Prices have a median discontinuous change of 24 percent at the border and 0 percent at state boundaries.

DOI

10.1257/aer.101.6.2450

Volume

101

Issue

6

Pages

2450-2486

Language

en

Sources

openalex bibtex:phds-export.bib crossref

Cite

APA 7 MLA 9 Chicago (author–date) Harvard Elsevier Harvard (JFE, JBF…) The Accounting Review Academy of Management American Marketing Association INFORMS (Management Science) Copy citation Copied ✓