What Border?

A Study of Price Convergence across the 49^th Parallel

Janet Ceglowski

Economics Department

Bryn Mawr College

Bryn Mawr PA 19010

jceglows@brynmawr.edu

September 2001

Abstract This paper tests for international price parity in a three-dimensional sample of retail prices for 21 consumer goods in 25 Canadian cities and 24 US cities. It finds sizable cross-border price differences for individual products in the short run. However panel unit root tests reveal that a majority of the cross-border relative price series are stationary and that short-run international price differences are eliminated at average speeds comparable to those for intranational prices. These results indicate that price convergence across the Canada-US border is more widespread than previously reported. By implication, the border may not be the formidable barrier previous studies have suggested it is.