|Author Name||Cecilia GUERRERO (Heinrich Heine University Düsseldorf) / MORI Tomoya (Faculty Fellow, RIETI) / Jens WRONA (University Duisburg-Essen, CESifo, DICE)|
|Creation Date/NO.||June 2021 21-E-047|
|Research Project||Agglomeration-based Framework for Empirical and Policy Analyses of Regional Economies|
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Using monthly price data from the Survey of Wholesale Markets for Fruits and Vegetables of Japan, we demonstrate that regional taste differences are an obstacle to inter-regional market integration. We propose a novel strategy for identifying the causal effect of localized tastes on bilateral market integration. We use the spatial distribution of historical dialects in Japan to measure historical-cultural proximity, which can be used as an instrument for the persistent dissimilarity in local food preferences. In accordance with the localized taste hypothesis, we find that regions which historically did not share a similar dialect/culture are characterized by persistent taste differences, explaining the lack of bilateral market integration among these regions.