Do Gasoline Prices Converge in a Unified Europe with Non-Harmonized Tax Rates?

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractThe 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 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.

Metropolitan House Prices in South Africa: Do They Converge?

“…Stated differently, convergence to the LOOP for a product means that its time series of relative prices as defined in is mean reverting or stationary (Dreher and Krieger, 2005:10). The common approach to examine price convergence is to apply a unit root test to examine the stationarity of the price differential series.…”

“…Unfortunately, the Augmented Dickey‐Fuller (ADF) test, which is the commonly used unit root test for a single time series, has low power, causing it to overly reject the stationarity hypothesis of a time series (Cecchetti et al. , 2002:1087; Dreher and Krieger, 2005:12; Fan and Wei, 2005:21). To address this problem, Levin, Lin and Chu (2002) (LLC) have shown that the use of a panel unit root test can significantly increase the power of a unit root test.…”

On the dynamics of gasoline market integration in the United States: Evidence from a pair-wise approach

“…In terms of consumer surplus and welfare, there is an expectation of fair pricing on the part of consumers, where price differentials are wholly attributed to transportation costs, taxation, and other explicit barriers. In addition to this, consumer price convergence can shift an energy tax burden onto the producers, which leads to a competitive disadvantage for firms in high-tax regions (Dreher and Krieger, 2005;Suvankulov et al, 2012).…”

Regional development in South Korea: accounting for research area in centrality and networks

“…Rejection of the unit root hypothesis also indicates that relative centrality scores follow a random walk. This means that deviation among the three regions' time series becomes permanent (Dreher and Krieger 2005). In addition, the Levin-Lin-Chu test assumes a common autoregressive parameter for all panels to deal with autocorrelation.…”