Convergence of construction costs in the single European market
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Several studies have shown evidence of price convergence between countries in the European Union (EU) since the establishment of the single market and the adoption of the euro by around half the countries as their single currency. In this study average construction costs for two building types in two groups of EU countries, one using the euro, the other using their individual national currencies, were gathered. These costs were converted to euros where necessary using two kinds of purchasing power parities, adjusted for inflation and brought to a common base date. The dispersion of these costs was analysed using the coefficient of variation. The results show little evidence of price convergence for non-residential construction for either country group. This is shown to be in contrast with convergence that is evident in the prices of other product groups. The results raise the question of why construction prices in the EU appear to be resistant to convergence even in the group of countries that share a single market and a single currency.
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