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Measuring the impact of road rehabilitation on spatial market efficiency in maize markets in Mozambique

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  • Xavier Cirera
  • Channing Arndt

Abstract

This article analyzes the impact of road rehabilitation on the spatial market efficiency of maize markets in Mozambique. We estimate a modified version of the Parity Bounds Model (PBM) that allows us to test the impact of road rehabilitation on spatial efficiency. This article seeks to contribute to the existing literature in three ways. First, a unique data set, where road rehabilitation episodes between market pairs are identified, is developed. Second, special care is devoted to estimation of transaction costs due to the sensitivity of the PBM model to the quality of transaction costs estimates. Finally, as opposed to most existing literature that focuses on relatively distant markets, the article focuses on spatially closed markets. We find that maize markets tend to be segmented due to high transport costs. Following road rehabilitation, inefficiency and average absolute price differentials tend to decrease, and market pairs have tended to shift toward autarky regimes. Overall, while the results point broadly toward a positive impact of road rehabilitation on spatial efficiency, they are not as strong or as robust as one would like. Large increases in fuel prices likely offset the positive impacts of road rehabilitation on transaction costs, contributing to the increase in the probability of being in an autarky regime. Copyright (c) 2008 International Association of Agricultural Economists.

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Bibliographic Info

Article provided by International Association of Agricultural Economists in its journal Agricultural Economics.

Volume (Year): 39 (2008)
Issue (Month): 1 (07)
Pages: 17-28

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Handle: RePEc:bla:agecon:v:39:y:2008:i:1:p:17-28

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Cited by:
  1. Van Campenhout, Bjorn, 2012. "Market Integration in Mozambique:: A Non-Parametric Extension to the Threshold Model," MSSP working papers 4, International Food Policy Research Institute (IFPRI).
  2. Ulimwengu, John & Funes, Jose & Headey, Derek & You, Liangzhi, 2009. "Paving the way for development?: The impact of transport infrastructure on agricultural production and poverty reduction in the Democratic Republic of Congo," IFPRI discussion papers 944, International Food Policy Research Institute (IFPRI).
  3. Ulimwengu, John M. & Funes, Jose & Headey, Derek D. & You, Liang, 2009. "Paving the Way for Development: The Impact of Road Infrastructure on Agricultural Production and Household Wealth in the Democratic Republic of Congo," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49292, Agricultural and Applied Economics Association.
  4. Acosta, Alejandro, 2012. "Measuring spatial transmission of white maize prices between South Africa and Mozambique: An asymmetric error correction model approach," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 7(1), October.
  5. Perakis, Sonja Melissa, 2012. "“Changing Spatial Maize Price Relationships in West Africa”," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124910, Agricultural and Applied Economics Association.
  6. Ankamah-Yeboah, Isaac, 2012. "Spatial Price Transmission in the Regional Maize Markets in Ghana," MPRA Paper 49720, University Library of Munich, Germany.
  7. Lederman, Daniel & Porto, Guido, 2014. "The price is not always right : on the impacts of (commodity) prices on households (and countries)," Policy Research Working Paper Series 6858, The World Bank.
  8. Alfieri, Andrea & Arndt, Channing & Cirera, Xavier, 2007. "Distortions to Agricultural Incentives in Mozambique," Agricultural Distortions Working Paper 48552, World Bank.

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