Has the growth and development of the European Union single market and the Euro accelerated a process of price convergence within the EU? Price convergence means that the gap in prices for the same good or service has come down and in theory, having one currency and an open market ought to bring down the extent of price variations. Our Timetric chart below tracks what has been happening to the price convergence indicator. A fall in the measure indicates a coming-together of average prices.

Price convergence indicator for the EU

Data from Timetric.

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Eurostat: the EU’s Statistical Service from Timetric

There is some evidence of price convergence - why has this been happening?

Why is there a greater variation in prices when all twenty seven of the EU nations are included contrasted with the countries inside the Euro Zone?

There are still many markets where the same products sell for vastly different prices - can you think of reasons why?

One underlying explanation for differences in prices ought to be variations in per capita incomes in the countries of the EU. I use this chart below to select some countries (including new EU members) to illustrate the variation - the data is expressed as a percentage of the EU27 average (which equals 100)

Data from Timetric.

To view this graph, please install Adobe Flash Player.

Eurostat: the EU’s Statistical Service from Timetric