We reexamine the evidence for border effects in deviations from the law of one price, using data for consumer prices … rather than price index data. We find evidence of border effects both in the levels of prices and the percentage change in … prices. Even accounting for distance between cities and relative population sizes, we find that the absolute difference …

.S. cities and Canadian cities for 14 categories of consumer prices to examine the nature of the deviations from the law of one … price. The distance between cities explains a significant amount of the variation in the prices of similar goods in … prices as adding 2500 miles between cities. …

lead to relative prices that do not reflect the true relative costs of production. From this standpoint, "external balance …