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| Provincial Border, Dialect Border, and the Law of One Price |
| GAO Jing, LIN Shu
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School of Economics, Fudan University;
Department of Economics, CUHK |
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Abstract Breaking and eliminating market segmentation, establishing an unified and open market system, and promoting rational flow and optimal allocation of production factors are important tasks in the transitioning China. This paper investigates the price behavior of services in the framework of the law of one price, and focuses on the roles of provincial border and dialect border in the short-run price disparities. We find that:(1) the provincial border effects are significant in education and medical industries, while they are weak in the other service industries;(2) the dialect border also plays a positive role in the education service, especially in the primary, junior high, and senior high school study;(3) we construct a model involving heterogeneity effect and sample selection effect to re-estimate the sample, and the results are robust. The above results reflect that the hukou system attached to the administrative boundary increases the implicit costs of cross-province mobility by influencing education and medical benefits, and regional differences in dialects further increase the resistance to cross regional mobility of the labor by influencing the education of their children.
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Received: 17 March 2017
Published: 01 November 2018
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