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Title:Do gasoline prices converge in a unified Europe with non-harmonized tax rates? PDF Logo
Authors:Dreher, Axel
Krieger, Tim
Issue Date:2005
Series/Report no.:Arbeitspapiere // Konjunkturforschungsstelle, Eidgenössische Technische Hochschule Zürich 114
Abstract:The paper presents univariate and panel unit root tests for gasoline and oil price convergence over the last decade. We test for the absolute versus relative version of the law of one price (LOOP) and estimate the speed of convergence as well as its development over time. Our results show that the absolute version of the LOOP cannot be supported. Constant price differences between countries remain, caused mainly by existing tax differences. The relative version of the LOOP is strongly supported by the data. The speed of convergence increased over time, but differs for gross and net-of-tax prices. We can show that national tax policy by EU member states is not (yet) threatened by arbitrage due to cross-border shopping.
Subjects:price convergence
law of one price
gasoline
international taxation
European integration
panel unit roots
JEL:H7
F15
Q48
C2
Persistent Identifier of the first edition:doi:10.3929/ethz-a-005104870
Document Type:Working Paper
Appears in Collections:KOF Working Papers, KOF Konjunkturforschungsstelle, ETH Zürich

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