José De Sousa attented the Growth Lab seminar series at Harvard University, Monday December 12. He presented “Market Integration and Convergence in Consumption Patterns“.
Our research question: Are consumer tastes affected by market integration? This research project aims at understanding whether trade integration makes consumption tastes converge. We find that France is characterized by strong localized tastes, while observing a convergence of consumption over time, which is not only due to price and income convergence. In short, France becomes “flatter”. We use an Almost Ideal Demand System to identify regional residual parameters after taking into account price and income effects. We then use these residuals to compute a bilateral taste between regions, and regress it on bilateral distance conditional on origin and destination fixed effects. We find that distance in taste is positively correlated with geographical distance, but with a decreasing magnitude over time. These results provide evidence that tastes converge in France from the seventies to today.