Spatial pattern of Russia’s market integration

This paper studies integration of regional goods markets in Russia over 2001–2019, analyzing the law of one price. The analysis involves all pairs of country’s regions, which provides a comprehensive spatial pattern of market integration. The region pairs are classified as belonging to one of four groups: integrated, conditionally integrated, not integrated but tending towards integration (converging) and neither integrated nor tending towards integration (among these, diverging). On average, a region is found to be perfectly and conditionally integrated with 48.7% of other regions and tending towards integration with 3.3% of them. Non-integration is due to random walking (41.2%) and deterministic divergence (6.8%). Geographical reasons explain the pattern obtained only partially. Apparently, idiosyncratic features of regional markets play a main role in non-integration.