The magnitude of deviations from the Law of One Price (LOP) across cities depends on a number of characteristics, including language differences, distance, and other correlates of trade costs. We show that in the USA, political differences between cities are an equally important determinant of LOP deviations. LOP deviations are smaller if the cities are both strongly Democrat or both strongly Republican. These effects are of a similar order of magnitude to those of distance, and suggest that political differences represent a substantial barrier to competition.

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E pluribus unum? 美国的政治分裂和对一价定律的背离

不同城市与一价定律 (LOP) 的偏差幅度取决于许多特征，包括语言差异、距离和其他与贸易成本相关的因素。我们表明，在美国，城市之间的政治差异是 LOP 偏差的同样重要的决定因素。如果两个城市都是强烈的民主党或都强烈的共和党，则 LOP 偏差会更小。这些影响与距离的影响具有相似的数量级，并表明政治差异是竞争的重大障碍。