On Interregional Price Differentials

It is often observed that the land value is extremely high in very big cities while commodity prices are not. The objective of this paper is to consider interregional price differentials in a microeconomic framework by explicitly incorporating land for housing, and to conduct an empirical analysis of the interregional differential indices. It is revealed that across regions the CPI varies slightly, per capita income varies more, the housing rent varies still more and the land value varies the most in Japanese cities. I provide microeconomic reasons for the differences in these differentials.