The Market for Tractors in the EU: Price Differences and Convergence

This study evaluates the degree of segmentation of the market for agricultural machinery and equipment in the EU. We focus on agricultural tractors, the most common and biggest investment in machinery and equipment in the agricultural sector. By using country price data for individual tractor models, we test the law of one price, i.e. the existence of a common price for tractors across EU member states. We find that significant price differences exist, yet unlike most other studies we find that large price deviations are penalised within a short time. The study also shows that transport costs are an important source of price differences, as domestic production leads to lower prices on the domestic market and as price convergence is negatively correlated with distance. Finally, price differences should not solely be understood from a geographical perspective, as evidence supports the idea that farmers’ buying power is significant in explaining price differences within countries.


Editor(s):
CEPS
Issue Date:
Jan 15 2013
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/144005
Total Pages:
22
Series Statement:
Factor Markets Working Paper




 Record created 2017-04-01, last modified 2017-11-14

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