48 REDUCING MARKET DISTORTIONS FOR A MORE PROSPEROUS UKRAINE BOX 3 Price Comparison Analysis: Are Prices of Basic Food Products Higher in Ukraine? n The analysis assessing whether food prices are signi昀椀cantly higher in Ukraine than in comparator countries uses two data sources: (a) “Numbeo” – an online global database of user contributed data on cost of living with information on consumer prices, and (b) Economist Intelligence Unit (EIU) – a survey-based database of consumer prices for over 160 items. The sample was restricted to products available in Ukraine and where yearly data were available in either the Numbeo or the EIU database. The sample covers yearly information on prices of 14 and 20 products, respectively, in the Numbeo and EIU databases from 2010 to 2017. Both databases apply di昀昀erent methodologies in gathering price data across countries, thus strengthening the comparability of price information used in this analysis. The baseline empirical speci昀椀cation for the price comparison analysis follows the equation: ln(Price ) = β Ukraine + β ln(Z ) + η + δ + ε it 1 2 it i t ijt where for each food product i in country j in year t; Price is the price (US$/kg), X is a vector of cost and demand shifters such as GDP per capita PPP (2011 international $), cost of imports, and tari昀昀 rates, Ukraine is a dummy variable for observa- tions in Ukraine, η are product 昀椀xed e昀昀ects, δ are year 昀椀xed e昀昀ects, and e is the error term. The Ukraine dummy variable captures the di昀昀erence in average food prices in Ukraine relative to the average prices across the comparator countries after adjusting for the di昀昀erences in per capita GDP PPP, import costs, customs duties, product types and time e昀昀ects. The variable capturing costs to import (taken from the Trading Across Border dataset) accounts for domestic transport costs. Other sources of transport costs (oversees shipping) depend on the origin and destination of each product, for which data is not consistently available. The food products were selected based on their relative importance to the average Ukrainian consumer and availability in the databases67. The analysis uses di昀昀erent sets of comparator jurisdictions to account for potential distortions in markets of other countries68. 67 The analysis used the following 14 products from the Numbeo database: Apples (1kg), Banana (1kg), Beef Round (1kg or Equivalent Back Leg Red Meat), Chicken Breasts (Boneless, Skinless, (1kg), Eggs (regular, 12), Lettuce (1 head), Loaf of Fresh White Bread (500g), Local Cheese (1kg), Milk (regular, 1 liter), Onion (1kg), Oranges (1kg), Potato (1kg), Rice (white, 1kg) and Tomato (1kg), while the following 20 products from the EIU database we analyzed: Apples (1 kg), Bananas (1 kg), Beef (昀椀let mignon, ground or minced, roast, steak, stewing, 1 kg), Butter (500 g), Chicken (fresh, frozen, 1 kg), Eggs (12), Flour (white, 1 kg), Fresh 昀椀sh (1 kg), Lettuce (1 head), Milk (pasteurized, 1 liter), Mushrooms (1 kg), Onions (1 kg), Oranges (1 kg), Peanut or corn oil (1 liter), Pork: (chops, loin, 1 kg), Potatoes (2 kg), Sugar (white, 1 kg), Tomatoes (1 kg), White bread (1 kg) and White rice (1 kg). 68 The comparator countries with available data in the Numbeo database include 35 OECD countries – Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, South Korea, Latvia, Luxembourg, Mexico, The Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, United Kingdom, and United States – and 7 additional selected regional – Bulgaria, Croatia, Georgia, Kazakhstan, Lithuania, Moldova, and Romania. The comparator countries with available data in the EIU database include 32 OECD countries – Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, South Korea, Luxembourg, Mexico, The Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Spain, Sweden, Switzerland, Turkey, United Kingdom, and United States and 3 additional selected regional – Bulgaria, Kazakhstan, and Romania.