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Title:Demand and distance: Evidence on cross-border shopping PDF Logo
Authors:Asplund, Marcus
Friberg, Richard
Wilander, Fredrik
Issue Date:2005
Series/Report no.:SSE/EFI Working Paper Series in Economics and Finance 587
Abstract:While many studies have documented deviations from the Law of One Price in international settings, evidence is scarce on the extent to which consumers take advantage of price differentials and engage in cross border shopping. We use data from 287 Swedish municipalities to estimate how responsive alcohol sales are to foreign prices, and relate the sensitivity to the location's distance to the border. Typical results suggest that the elasticity with respect to the foreign price is around 0.4 in the border region; moving 200 (400) kilometers inland reduces it to 0.2 (0.1). Given that cross country price differences for alcohol and other products are often caused by taxes, our evidence has implications for the debate on tax competition/harmonization.
Subjects:Law of one price
tax competition
tax harmonization
cross border shopping
European integration
JEL:F15
H20
H77
R12
Document Type:Working Paper
Appears in Collections:SSE/EFI Working Paper Series in Economics and Finance, EFI - The Economic Research Institute, Stockholm School of Economics

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