Interregional Price Research Articles

Динамика конкурентоспособности северных регионов за 2008–2020 годы: разработка методики оценки

The conceptual ambiguity of the definition of regional competitiveness hinders the development of socio-economic policy measures to increase a region’s attractiveness to people and capital. The methodology for assessing competitiveness presented in this study evaluates the attractiveness of a region for business, considering the well-being of the population, environmental conditions, economic efficiency and development of innovation and information systems. Technically, the proposed methodology relies on the linear scaling method and various approaches to accounting for interregional price discrimination. Analysis of data obtained from the northern regions of Russia confirmed the conceptual link between competitiveness and productivity and production factors. The key regional competitiveness indicators are personal income and efficiency of production factors — capital intensity and wage intensity. The study revealed low competitiveness of the majority of the northern regions due to the insufficient development of the information system, low attractiveness for business and population, poor economic efficiency and little innovation. In order to maintain high competitiveness of the most successful regions — Yamalo-Nenets Autonomous Okrug, Khanty-Mansi Autonomous Okrug and Sakhalin Oblast — authorities should pay more attention to environment and innovation. The lagging regions need to implement measures to attract investment, increase spending on transport infrastructure, and reduce poverty and unemployment. Additionally, the least competitive regions — Nenets Autonomous Okrug, Kamchatka Krai, Arkhangelsk Oblast and the Republic of Sakha (Yakutia) — are recommended to focus on improving the regions’ information infrastructure and attractiveness for business. The article demonstrated that more reliable results can be obtained by using the index of budget expenditures instead of the cost of a fixed basket of goods and services adjusted for a specific region, since it better reflects the high cost of life in the northern regions. The findings can be used to develop socio-economic policy of the northern regions of Russia.

Перераспределение первичных доходов населения как фактор снижения неравенства и ускорения экономического роста на региональном уровне

The existing income gaps significantly limit the regional and economic development. At the same time, the high economic growth potential due to the use of consumer demand necessitates the examination of the intensification of this factor of economic dynamics, including through the resource allocation policy. The article considers the macroeconomic efficiency of the redistribution of primary household incomes at the regional level. Regional distribution of the total income of the population by income quintile groups, as well as the average per capita income were analysed based on the data obtained from the Federal State Statistics Service. The redistribution of primary incomes through the differentiation of tax rates is considered the most important factor in increasing the dynamics of consumer demand (an increment of the personal income tax by 12 percentage points (up to 25 %) for the fifth quintile group is used in the calculations). The study aims to assess the possible impact of such redistribution on the income inequality and economic dynamics of Russia and its regions. The potential for gross regional product (GRP) growth resulting from an increase in social support for the least income groups was estimated using the methods of mathematical analysis, multisectoral and interregional modelling. The calculations show that an increase in consumer spending in 2019 in the economy as a whole could have amounted to +5.2 %; the estimate of the increase in total GRP was +2.7 %. Simultaneously, the ratio of the maximum and minimum regional per capita income decreased from 5 to 4 times, while the ratio of per capita GRP (excluding interregional price differentiation) decreased from 61.8 to 56.7 times (maximum/minimum level). The calculation results can be considered the first assessment of the possibilities of overcoming the limitations of regional development caused by low incomes and their significant differentiation. Future detailed studies should focus on developing comprehensive solutions in the field of economic policy.

Using a regression model for enhancing evaluation of regional purchasing power parities of the national currency with the main focus on teachers’ salaries in Russia

Introduction. Purchasing power of national currency varies widely across countries and regions, thus inter-regional comparisons pose a problem of financial and economic indicators comparability. In Russia, this issue is being currently solved by using the state budget expenditures index and the cost of a fixed set of goods and services (consumer basket) calculated for each region. The aim of this article is to propose and evaluate an alternative method of improving the accuracy of inter-regional price differentiation estimates. Materials and Methods. This study is based on the research investigation by Costa et al (2019) conducted on a sample of more than 300 regions of OECD countries. Relying on that research, the authors collected relevant data on Russian regions and analyzed a multiple linear regression model. Within the model, a consumer basket cost was a dependent variable, and the average income, the share of industry and the share of services in gross regional product were considered as independent variables. Results. The parameters of the model revealed an acceptable level of its explanatory power (R2 = 0.76), as well as a significant influence of all factors. Applying the model, the authors received the predicted consumer basket cost. Both types of the consumer basket costs (actual and predicted) were correlated with the external factors of regional price differentiation, selected from the literature as evaluation criteria: transport infrastructure quality, social inequality level, market competition level, regional fiscal policy, etc. The analysis revealed that significant correlations with the external parameters were higher for the predicted consumer basket cost as compared to the actual one. The possibility of using the results of this study to improve the accuracy of the comparative interregional analysis of financial and economic indicators is illustrated by the example of comparing the nominal and calculated adjusted values of teachers’ average salary in all regions of the Russian Federation. Conclusions. The findings suggest that the predicted consumer basket cost allows to conduct more accurate assessment of the differences in the national currency purchasing power in Russian regions. The results of the study can be used to improve the accuracy in comparative inter-regional investigations of financial and economic indicators.

Defining prices in an inter-regional SAM system

The literature of inter-regional social accounting matrices (SAM) focuses on quantity-oriented models that determine the transmission of income impacts. This paper develops a price version to identify the channels of price transmission at the inter-regional (or inter-country) level. The method proposed divides the total multiplier effects into intra-regional price multipliers (i.e. the cost impacts within a region), open loop inter-regional price multipliers (i.e. the cost impacts from one region on another by quantifying all the within-region impacts), and closed loop inter-regional price multipliers (i.e. the circular cost impacts transiting through the accounts in the other region and returning to the starting region). In addition, the intra-regional multipliers are divided into the intra-account, the inter-account and the cross-account (circular) effects. The empirical application, which uses a bi-regional SAM that distinguishes the United States (USA) and China (CHN), highlights the importance of the within-region interdependences for explaining price impacts.

Interregional price linkages of fossil-energy and food sectors: evidence from an international input–output analysis using the GTAP database

This study examined the impacts of price changes in fossil-energy resources on food prices across the world. We approached this issue with the input–output (IO) price model, which is suitable for evaluating the price effects due to cost-push (supply driven) processes through transaction linkages of intermediate goods. We employ an international interregional IO table comprising 14 regions and 57 industrial sectors, which is compiled from the global trade analysis project (GTAP) 9 database. The results revealed: (1) interregional price linkages are particularly strong between a wheat-producing region and energy producers in the adjacent regions; and (2) the world oil sector appears to exert the strongest effects on mechanized sectors (wheat, plant fibers and fishing) and regions practicing advanced agriculture (East Asia, the US, and Russia). Furthermore, a comparison with empirical observations suggests that approximately one tenth of observed 2-year price changes in US wheat in 2004–2016 can be explained by the cost-push processes derived from the world oil price changes.

Regional price deflators in Poland: evidence from NUTS-2 and NUTS-3 regions

ABSTRACTThis paper analyzes regional price differentials in Poland at the NUTS-2 and NUTS-3 levels. It applies unique raw-price data and calculates regional purchasing power parity (PPP) deflators for the 16 NUTS-2 regions. It then estimates PPP deflators for the 66 NUTS-3-level regions by applying the multiple imputation approach. Finally, it verifies whether these are intra- or interregional price inequalities that have a greater influence on the overall price inequality level. It is found that the price levels are significantly higher than the average in the better-developed regions and lower in the lagging ones. It is also found that it is the intra- rather than the interregion differentials that influence more the overall inequality level.

On the effects of storage facilities on optimal zonal pricing in electricity markets

This paper analyzes the effects of storage facilities on optimal zonal pricing in competitive electricity markets. In particular, we analyze a zonal pricing model that comprises consumers, producers, and storage facilities on a network with constrained transmission capacities. In its two limit cases, our zonal pricing model includes the reference nodal pricing model as well as the uniform pricing model with storage. To the best of our knowledge we are the first to analyze zonal pricing in the presence of storage. As our numerical results show, storage facilities do not only reduce the inter-temporal price volatility of a market, but may considerably change the inter-regional price structure. In particular, the inter-regional price volatility may increase in the presence of storage, which may imply a complete reconfiguration of optimal zonal boundaries as compared to the no-storage case. However, market participants may have an incentive to keep or implement a sub-optimal zonal design. Thus, storage facilities will in general challenge optimal congestion management with common heuristic approaches to configure optimal price zones (e.g., the use of congested transmission lines of a nodal pricing system) not always suggesting optimal zonal configurations. Therefore, we propose a model extension that allows policy makers to determine welfare maximizing zonal configurations, which account for the complex inter-regional price effects of storage facilities. Especially with regard to increasing storage investments, such a model may help to (at least partially) handle the described inefficiency problems regarding sub-optimal zonal designs that may challenge European or Australian zonal electricity markets in the near future.

“Asian premium” or “North Atlantic discount”: Does geographical diversification in oil trade always impose costs?

We develop a Global Oil Trade Model (GOTM) to examine the ability of large crude oil exporters or importers to influence inter-regional price differentials by allocating their sales or purchases respectively among different crude oil consuming or producing regions. The model is based on the trade-offs among freight costs, qualities of the crude oils traded and the technical configurations of refineries that process the crude oil. Our reference case (based on 2012 data) minimizes the sum of freight costs and the costs of processing sub-optimal grades of crude oil at a refinery. We model a large Middle East exporter allocating its supply regionally as the leader in a Stackelberg game where all other producers and importers are price takers on the competitive fringe. We then examine the ability of a coalition of importers in Asia to make countervailing strategic purchases rather than act as a price taker. We find that large sellers can increase their revenues while diversifying their customer base by allocating volumes to more distant markets if, by doing so, they capture locational rents from more proximate buyers. Large buyers are unable to reduce their costs compared to the competitive market outcome by adopting countervailing purchase strategies but have the potential to disrupt the rent-seeking of large sellers.

Non-Linearities in the Relationship between House Prices and Interest Rates: Implications for Monetary Policy

Understanding the impact of changes in interest rates on house prices is important for managing house price bubbles and ensuring housing affordability. This paper investigates the effect of interest rates on regional house price to income measures based on a non-linear smooth transition VAR model of inter-regional house price dynamics. To minimize the impact of housing mix changes on estimated effects, we apply the model to an Australian dataset of regional hedonic house price indices that account for both changes in housing mix and quality over time. The empirical analysis provides evidence that house price to income ratios depend non-linearly on interest rates, and moreover that there is an interest rate ‘transition point’ below which a house price bubble is probable. We investigate the implications for monetary policy of stable and unstable house price regimes and propose a housing lending rate lower bound that achieves long-run house price stability in the presence of regime uncertainty. To check the generality of the result, we also apply the model to aggregate Australian and US data.

Spatial Patterns of Subprime Mortgages by Local Banks, Nonlocal Banks, and Independents in the Continental US

Mortgage innovations and New Deal agencies facilitated lower priced loans for prime borrowers and minimum price disparities across US regions. In the 1980s deregulation removed price restrictions on banks' mortgages and also removed geographic distance restrictions on lending, opening the subprime industry. Global and local Moran indices identified interregional price disparities based upon proportions of subprime mortgage originations. A cluster of high-priced mortgage originations was found along the Gulf States both before and after the subprime collapse of 2007. Local banks, perceived to have special underwriting knowledge about their markets, and who were more likely to offer preferred prices, were compared with nonlocal banks and independent mortgage companies on their spatial distributions of mortgage pricing. During the boom and bust years from 2005 to 2008, the regional patterns of proportions of subprime mortgages for each mortgage institution type were similar, adversely impacting borrowers in the Southern Gulf region. These spatial patterns suggest that nonlocal banks and independents made the same underwriting conclusions about borrowers in regional markets as the local bank specialists.

Railroads of the Raj: Estimating the Impact of Transportation Infrastructure

How large are the benefits of transportation infrastructure projects, and what explains these benefits? This paper uses archival data from colonial India to investigate the impact of India's vast railroad network. Guided by four results from a general equilibrium trade model, I find that railroads: (1) decreased trade costs and interregional price gaps; (2) increased interregional and international trade; (3) increased real income levels; and (4) that a sufficient statistic for the effect of railroads on welfare in the model accounts well for the observed reduced-form impact of railroads on real income in the data. (JEL H54, L92, N75, O22, R12, R42)

Datengewinnung im periodischen regionalen Preisvergleich–Die Problematik der Mieten und Immobilienpreise

In der letzten Zeit ist von verschiedenen Seiten ein wachsendes Interesse an amtlichen regionalen Preisniveauvergleichen festzustellen. Es stellt sich daher die Frage, wie ein solcher regionaler Preisniveauvergleich methodisch korrekt und mit moglichst geringen zusatzlichen Kosten in das bestehende System der Preisstatistik integriert werden kann. Wegen ihrer grosen Bedeutung fur die privaten Konsumausgaben und ihrer sehr unterschiedlichen regionalen Verteilung, spielen besonders die Preise fur Guter aus dem Bereich „Wohnen“ hierfur eine grose Rolle. Der Beitrag soll die Frage klaren, inwiefern fur diesen Bereich bestehende amtliche und nichtamtliche Datenquellen zur Berechnung eines regionalen Preisindexes genutzt werden konnen. Hierzu wird zunachst auf die speziellen Anforderungen an Preisdaten beim interregionalen Preisniveauvergleich im Gegensatz zum intertemporalen Preisniveauvergleich eingegangen. Nach der detaillierten Vorstellung moglicher amtlicher und nichtamtlicher Datenquellen zu Immobilienpreisen und Wohnungsmieten, werden diese auf Ihre Eignung an Hand eines hierzu formulierten Systems von Gutekriterien getestet und Handlungsempfehlungen fur eine Harmonisierung und methodische Weiterentwicklung der nichtamtlichen Datenquellen gegeben (154 Worter).

Interregional Price Difference in the New Orleans Auctions Market for Slaves

Our article investigates the variation of winning bids in slave auctions held in New Orleans from 1804 to 1862. Specifically, we measure the variation in the price of slaves conditional on their geographical origin. Previous work using a regression framework ignored the auction mechanism used to sell slaves. This introduced a bias in the conditional mean of the winning bid because it depended on the number of bidders participating in the auction. Unfortunately, the number of bidders is unobserved by the econometrician.We adopt the standard framework of a symmetric independent private value auction and propose an estimation strategy to attempt to deal with this omitted variable bias. Our estimate of the mean number of bidders doubled from 1804 to 1862. We find the number of bidders had a significant positive effect on the average winning bid. An increase from 20 to 30 bidders in an auction raised the average winning bid by around 10%%. The price variation according to the geographical origin of slaves found in earlier work continues to persist after accounting for the omitted variable. We also find a new result that a considerable premium is paid for slaves originating from New Orleans. However, this price variation disappears once we account for regional productivity differences.

Illicit Agricultural Trade

Agricultural and wildlife trade is subject to sudden, disruptive import restrictions arising from concerns over sanitary and phytosanitary safety and the conservation of natural resources. These restrictions can create significant international price differences that encourage the smuggling of goods across borders. This article presents an equilibrium model of smuggling where the supply and demand for smuggled goods depend on interregional price disparities in the presence of a trade ban. In this model, smuggling is more prevalent when demand and supply among trade partners is more inelastic or when there are fewer total trade partners at the time a trade ban is enacted. Applications are presented for regionalization, destruction of goods in government eradication programs, price support, stockpiling, and the development of substitutes. Regionalization may increase smuggling under certain production and consumption patterns.

Disparities in Prices and Income across German NUTS 3 Regions

Abstract In EU countries, knowledge on spatial disparities in overall price level is extremely scarce. When interregional price disparities are large, however, nominal income measures fail to assess prosperity and the catch-up processes of regions. Despite its importance for regional policy, no official regional price statistic is available as a standard. On account of this gap, this paper deals with the econometric estimation of regional price indices for German NUTS 3 regions. Econometric price models for the consumer price index (CPI) and the housing rent index (HRI) are developed on the ground of utility maximization in a two-goods model. The estimated price indices are used to analyse price disparities in the period 1995–2004 across German NUTS 3 regions. Real income comparisons show that the East /West gap is likely to be substantially larger than assessed from incomplete price data in previous studies.

Upgrading, Changing Competitive Pressures, and Diverse Practices in the East and Central European Apparel Industry

After a period in the 1990s of rapid integration into the production and trade networks of the European Union (EU) (and to a lesser extent of the United States), clothing manufacturers in East and Central Europe have had to adjust quickly to the changing costs of production with EU accession, the rise of Chinese exports, and the 1 January 2005 final phaseout of quantitative quotas into major markets. In this paper we focus on the changing competitive pressures on clothing producers in the region and on the diversity of adjustments currently being made in response to these changes. In particular, we detail the wide range of adjustment strategies being adopted by firms in Slovakia and Bulgaria, and show how interregional price competition, downgrading, and geographical shifts in patterns of sourcing and production are articulated with imperatives to regionalized production for major markets, stabilization of supply networks, industrial upgrading, and the expansion of localized sourcing and domestic-marketing strategies.

Measuring the Social Return to Infrastructure Investments Using Interregional Price Gaps: A Natural Experiment

The objective of this study is to provide microeconometric evidence on the welfare gain of transport infrastructure investments. Speciflcally, I consider an investment in China that doubles the tracks of a one-thousand-mile-long railroad in 1994. This provides a quasi-experimental setting: the expansion in rail capacity only afiects the trade of goods in one direction. I flrst estimate the impact of this investment on interregional price difierences, flnding that they are reduced by about thirty percent following the investment. I then derive a (partial equilibrium) measure transforming the estimated shrinkage of price gaps into welfare estimates. I flnd that the internal rate of (social) return of the investment may signiflcantly exceed the costs of capital in China.

Inter-Regional Price Convergence and Market Integration in Russia

The paper analyzes a spatial pattern of goods market integration in Russia. By the spatial pattern is meant a state of each individual region of the country: whether it is integrated, and if not, whether it moves towards integration. Time series of the cost of the basket of 25 basic foods across 75 regions of Russia for 1994-2000 with monthly frequency are used as the empirical stuff. With the use of nonlinear cointegration relationship that includes asymptotically subsiding trend capturing movement towards integration, 36% of Russian regions are found to be integrated with the national market; 44% of them are non- integrated, but are tending to integration with the national market; and 20% of regions are non-integrated and having no such a trend. It is found that s-convergence of regional prices takes place, implying that, despite the presence of regions not tending to integration, the predominant trend is the improvement in market integration. (This abstract was borrowed from another version of this item.)

A CGE analysis of trade costs in the Russian agrofood sector

AbstractTen years after the end of central planning, enormous interregional price differences indicate that Russian food markets are not well integrated spatially. Trade potentials are thus not exploited, most probably because of high trade costs. Besides transport costs, transaction costs seem to play an important role as an impediment to interregional arbitrage. These transaction costs can be very high in transition countries due to underdeveloped market structures and weak public institutions. After subtracting transport costs from interregional price differences, large differences remain, particularly in the case of high‐value products. It is assumed that these residual price differences constitute the transaction cost component of total trade costs. The regional economic impact of different trade cost components is quantified using a bi‐regional computable general equilibrium (CGE) model. Simulations show that the results are quite different between the two stylized regions (East and West), depending on which trade cost component is reduced. While the welfare effects of varying customs tariffs and transport margins are rather limited, lower transaction costs of trade seem to be a promising way to achieve a better functioning food market in Russia.

Fresh Fish Markets in Oman

Previous studies have indicated serious impacts of current market organization on the distribution of fresh fish and consequently on the prevalent pricing system leading to high inter-regional price differences and lack of market integration. The primary area of inquiry in this study relates to market integration as a proxy for spatial pricing efficiency. The Law of One Price (LOP) analysis was used to test whether prices in pairs of markets are integrated through transfer costs or not. The findings of this study have practical policy implications indicating that the current marketing system for fish in Oman is not supporting a fair distribution of returns from fisheries operations to all participants in the sector.