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Market integration and convergence to the law of one price in the North American onion markets

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Author Info

  • Dwi Susanto

    (Center for North American Studies (CNAS), Department of Agricultural Economics, Texas A&M University, College Station, TX 77843-2124)

  • C. Parr Rosson

    (Center for North American Studies (CNAS), Department of Agricultural Economics, Texas A&M University, College Station, TX 77843-2124)

  • Flynn J Adcock

    (Center for North American Studies (CNAS), Department of Agricultural Economics, Texas A&M University, College Station, TX 77843-2124)

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    Abstract

    The North American agricultural markets have become much more integrated; but the level of integration varies across sectors and over time. Differential tariff phasing-out periods and remaining trade disputes are two of many factors contributing to this. This article applies panel data unit root tests to study price convergence and market integration in the North American onion markets. Commodity and variety monthly base price data for the period of 1998 to 2006 are used. Empirical results decisively suggest the existence of price convergence across markets as well as onion varieties. A two-sample period analysis shows an increase in the speed of price convergence over time, suggesting deeper market integration as NAFTA was fully implemented. Further analysis based on a two-country-market basis found that U.S.-Canadian markets have experienced deeper market integration compared with U.S.-Mexican markets as well as Canadian-Mexican markets. [EconLit citations: F150, Q170]. © 2008 Wiley Periodicals, Inc.

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    Bibliographic Info

    Article provided by John Wiley & Sons, Ltd. in its journal Agribusiness.

    Volume (Year): 24 (2008)
    Issue (Month): 2 ()
    Pages: 177-191

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    Handle: RePEc:wly:agribz:v:24:y:2008:i:2:p:177-191

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    Web page: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1520-6297

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    1. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, Elsevier, vol. 115(1), pages 53-74, July.
    2. Goldberg, Pinelopi & Verboven, Frank, 2001. "Market Integration and Convergence to the Law of One Price: Evidence from the European Car Market," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2926, C.E.P.R. Discussion Papers.
    3. Doan, Darcie & Goldstein, Andrew & Zahniser, Steven & Vollrath, Tom & Bolling, Chris, 2005. "North American Integration in Agriculture: A Survey," 2004 NAAMIC Workshop I: North American Agrifood Market Integration: Current Situtation and Perspectives, North American Agrifood Market Integration Consortium (NAAMIC) 163851, North American Agrifood Market Integration Consortium (NAAMIC).
    4. Vollrath, Thomas L., 2003. "North American Agricultural Market Integration And Its Impact On The Food And Fiber System," Agricultural Information Bulletins, United States Department of Agriculture, Economic Research Service 33639, United States Department of Agriculture, Economic Research Service.
    5. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, Elsevier, vol. 108(1), pages 1-24, May.
    6. R. Moodley & William Kerr & Daniel Gordon, 2000. "Has the Canada-US trade agreement fostered price integration?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 136(2), pages 334-354, June.
    7. Ralph Bierlen & Eric J. Wailes & Gail L. Cramer, 1998. "Unilateral reforms, trade blocs, and law of one price: MERCOSUR rice markets," Agribusiness, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 14(3), pages 183-198.
    8. Maddala, G S & Wu, Shaowen, 1999. " A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 61(0), pages 631-52, Special I.
    9. Rosson, C. Parr, III, 2005. "Forces Shaping Trade: The WTO, Trade Agreements, and Market Integration," Choices, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 20(2).
    10. Stephen G. Cecchetti & Nelson C. Mark & Robert J. Sonora, 2002. "Price Index Convergence Among United States Cities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 1081-1099, November.
    11. Doan, Darcie & Goldstein, Andrew & Zahniser, Steven & Vollrath, Thomas L. & Bolling, H. Christine, 2004. "North American Integration In Agriculture: A Survey Paper," North American Agrifood Integration: Situation and Perspectives, May 2004, Cancun, Mexico, Farm Foundation 16730, Farm Foundation.
    12. Zahniser, Steven, 2004. "Integration of North American Agriculture," Amber Waves, United States Department of Agriculture, Economic Research Service, United States Department of Agriculture, Economic Research Service, June.
    13. Parsley, David C & Wei, Shang-Jin, 1996. "Convergence to the Law of One Price without Trade Barriers or Currency Fluctuations," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 111(4), pages 1211-36, November.
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