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Grain marketing policy changes and spatial efficiency of maize and wheat markets in Ethiopia

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Author Info
Negassa, Asfaw
Myers, Robert
Gabre-Madhin, Eleni Z.
Abstract

"In the context of on-going market reform in developing countries, there is a need for an improvement in the existing methods of spatial market efficiency analysis in order to better inform the debate toward designing and implementing new grain marketing policies, institutions, and infrastructure that facilitate the emergence of a well developed and competitive grain marketing system. The standard parity bounds model (PBM), while it overcomes many weaknesses of the conventional methods of spatial market efficiency analysis, it does not allow for the test of structural changes in spatial market efficiency as a result of policy changes. In this paper, building on the standard PBM, we develop an extended parity bounds model (EPBM). The EPBM is a stochastic gradual switching model with three trade regimes. The EPBM is estimated by maximum likelihood procedure and allows for tracing the time path and structural change in spatial market efficiency conditions due to the policy changes. We applied the EPBM to analyze the effect of grain marketing policy changes on spatial efficiency of maize and wheat markets in Ethiopia. The results show that the effect of policy changes on spatial market efficiency is not significant statistically in many cases; there is high probability of spatial inefficiency in maize and wheat markets before and after the policy changes. The implication of these results is that maize and wheat markets are characterized by periodic gluts and shortages, which can undermine the welfare of producers, grain traders and consumers. It is also observed that the nature of spatial inefficiency for maize and wheat markets is different implying that the two commodities might require different policy responses in order to improve spatial market efficiency. Maize traders made losses most of the time while wheat traders made excess profits most of the time covered by the study." Authors' Abstract

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Paper provided by International Food Policy Research Institute (IFPRI) in its series MTID discussion papers with number 66.

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Date of creation: 2004
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Handle: RePEc:fpr:mtiddp:66

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Keywords: Stochastic analysis ; structural change ;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  5. Goletti, Francesco & Minot, Nicholas, 1997. "Rice markets, agricultural growth, and policy options in Viet Nam," MTID discussion papers 14, International Food Policy Research Institute (IFPRI). [Downloadable!]
  6. Steven Durlauf & Marcel Fafchamps, 2004. "Social Capital," Development and Comp Systems 0409060, EconWPA. [Downloadable!]
    Other versions:
    • Steven N. Durlauf & Marcel Fafchamps, 2004. "Social Capital," NBER Working Papers 10485, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    • Durlauf, Steven N. & Fafchamps, Marcel, 2005. "Social Capital," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 26, pages 1639-1699 Elsevier. [Downloadable!] (restricted)
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  11. Rola, Agnes & Rola, Walfredo & Tiongco, Marites & Delgado, Christopher L., 2003. "Livestock intensification and smallholders," MTID discussion papers 59, International Food Policy Research Institute (IFPRI). [Downloadable!]
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  16. Shahabuddin, Quazi & Dorosh, Paul A., 2002. "Comparative advantage in Bangladesh crop production," MSSD discussion papers 47, International Food Policy Research Institute (IFPRI). [Downloadable!]
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  17. Raju , K. V. & Gulati, Ashok & Meinzen-Dick, Ruth Suseela, 2003. "Innovations in irrigation financing," MSSD discussion papers 58, International Food Policy Research Institute (IFPRI). [Downloadable!]
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  19. Fafchamps, Marcel & Minten, Bart, 1999. "Property rights in a flea market economy," MTID discussion papers 27, International Food Policy Research Institute (IFPRI). [Downloadable!]
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  20. Dorosh, Paul A. & Shahabuddin, Quazi & Aziz, M. Abdul & Farid, Naser, 2002. "Bumper crops, producer incentives and persistent poverty," MSSD discussion papers 43, International Food Policy Research Institute (IFPRI). [Downloadable!]
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  21. Delgado, Christopher L. & Courbois, Claude & Rosegrant, Mark W., 1998. "Global food demand and the contribution of livestock as we enter the new millennium," MTID discussion papers 21, International Food Policy Research Institute (IFPRI). [Downloadable!]
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  23. Badiane, Ousmane & Nuppenau, Ernst-August, 1997. "Reforming and promoting local agricultural markets," MTID discussion papers 10, International Food Policy Research Institute (IFPRI). [Downloadable!]
  24. Minot, Nicholas & Daniels, Lisa, 2002. "Impact of global cotton markets on rural poverty in Benin," MTID discussion papers 48, International Food Policy Research Institute (IFPRI). [Downloadable!]
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  25. Peterson, Everett B. & Orden, David, 2004. "Effects of tariffs and sanitary barriers on high- and low-value poultry trade," MTID discussion papers 64, International Food Policy Research Institute (IFPRI). [Downloadable!]
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  26. Delgado, Christopher L. & Rosegrant, Mark W. & Steinfeld, Henning & Ehui, Simeon K. & Courbois, Claude, 1999. "The growing place of livestock products in world food in the twenty-first century," MTID discussion papers 28, International Food Policy Research Institute (IFPRI). [Downloadable!]
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  28. Gabre-Madhin, Eleni Z. & Haggblade, Steven, 2003. "Successes in African agriculture," MSSD discussion papers 53, International Food Policy Research Institute (IFPRI). [Downloadable!]
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Cited by:
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  1. Dev, S. Mahendra & Ravi, C. & Viswanathan, Brinda & Gulati, Ashok & Ramachander, Sangamitra, 2004. "Economic liberalisation targeted programmes and household food security," MTID discussion papers 68, International Food Policy Research Institute (IFPRI). [Downloadable!]
  2. Pyakuryal, Bishwambher & Thapa, Y. B. & Roy, Devesh, 2005. "Trade liberalization and food security in Nepal," MTID discussion papers 88, International Food Policy Research Institute (IFPRI). [Downloadable!]
  3. Rashid, Shahidur, 2004. "Spatial integration of maize markets in post-liberalized Uganda," MTID discussion papers 71, International Food Policy Research Institute (IFPRI). [Downloadable!]
  4. Diao, Xinshen & Diaz-Bonilla, Eugenio & Robinson, Sherman & Orden, David, 2005. "Tell me where it hurts, an' I'll tell you who to call," MTID discussion papers 84, International Food Policy Research Institute (IFPRI). [Downloadable!]
  5. Gulati, Ashok & Fan, Shenggen & Dalafi, Sara, 2005. "The dragon and the elephant," MTID discussion papers 87, International Food Policy Research Institute (IFPRI). [Downloadable!]
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  6. Rakotoarisoa, Manitra A., 2006. "Policy distortions in the segmented rice market:," MTID discussion papers 94, International Food Policy Research Institute (IFPRI). [Downloadable!]
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