Working Paper: NBER ID: w7242
Authors: Charles Engel; John H. Rogers
Abstract: We use new disaggregated data on consumer prices to determine why there is variability in prices of similar goods across U.S. cities. We address questions similar to those that have arisen in the international context: is this variability purely a result of market segmentation or do sticky nominal prices play a role? We also examine how the degree of tradability of a good influences price variability. Surprisingly, we find that variability is larger for traded-goods. We attribute this finding to greater price stickiness for non-traded goods. Distance between cities accounts for a significant amount of the variation in prices between pairs of cities. But we also find that nominal price stickiness plays an even more significant role.
Keywords: No keywords provided
JEL Codes: E3; E4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| market segmentation (M31) | price variability (L11) |
| sticky nominal prices (E64) | price variability (L11) |
| degree of tradability of goods (F10) | price variability (L11) |
| distance between cities (R12) | price variability (L11) |
| sticky nominal prices (E64) | distance between cities (R12) |
| traded goods (F19) | price variability (L11) |
| non-traded goods (F19) | price stickiness (L11) |