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Maize Markets In Mozambique: Testing For Market Integration

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  • Penzhorn, Niels
  • Arndt, Channing

Abstract

The issue of market integration lies at the heart of many contemporary debates concerning market liberalization, price policy, and government agency reforms in developing country food markets, Mozambique being one of the poorest. Without spatial integration of markets, price signals will not be transmitted from deficit to surplus areas, prices will be more volatile, agricultural producers will fail to specialize according to long-term comparative advantage, and the gains from trade will not be realized. The objective of this article is to indicate the extent of market integration between major Mozambican maize markets. Recognizing the statistical dangers and inaccuracies of using measures of price correlation to test for market integration, a new methodology for testing the state of food market integration is employed in this study, namely the parity bounds model, (PBM) as developed by Baulch (1997). This method provides a more reliable procedure for testing violations of spatial arbitrage conditions than conventional methods, because it compares time series of observed price differentials with transfer costs and explicitly recognizes that spatial arbitrage conditions are represented by inequality constraints. The results point to a failure of spatial arbitrage conditions between the Maputo and Chimoio markets about 23% of the time over the period

Suggested Citation

  • Penzhorn, Niels & Arndt, Channing, 2002. "Maize Markets In Mozambique: Testing For Market Integration," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 41(2).
    • Handle: RePEc:ags:agreko:245992
    DOI: 10.22004/ag.econ.245992
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    References listed on IDEAS

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    1. Bob Baulch, 1997. "Transfer Costs, Spatial Arbitrage, and Testing for Food Market Integration," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 477-487.
    2. C. Arndt & H.T. Jensen & S. Robinson & F. Tarp, 2000. "Marketing Margins and Agricultural Technology in Mozambique," Journal of Development Studies, Taylor & Francis Journals, vol. 37(1), pages 121-137, October.
    3. Channing Arndt & Henning Tarp Jensen & Finn Tarp, 2000. "Stabilization and structural adjustment in Mozambique: an appraisal," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(3), pages 299-323, April.
    4. Jensen, Tarp & Tarp, Finn, 2007. "Agricultural Technology and Marketing Margins in Vietnam," MPRA Paper 29820, University Library of Munich, Germany.
    5. Dessalegn, Gebremeskel & Jayne, Thomas S. & Shaffer, James D., 1998. "Market Structure, Conduct, and Performance: Constraints of Performance of Ethiopian Grain Markets," Food Security Collaborative Working Papers 55597, Michigan State University, Department of Agricultural, Food, and Resource Economics.
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    Cited by:

    1. Sam Jones & César Salazar, 2021. "Infrastructure Improvements and Maize Market Integration: Bridging the Zambezi in Mozambique," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(2), pages 620-642, March.
    2. Stephan von Cramon-Taubadel, 2017. "The analysis of market integration and price transmission – results and implications in an African context," Agrekon, Taylor & Francis Journals, vol. 56(2), pages 83-96, April.
    3. Negassa, Asfaw & Myers, Robert & Gabre-Madhin, Eleni Z., 2004. "Grain marketing policy changes and spatial efficiency of maize and wheat markets in Ethiopia," MTID discussion papers 66, International Food Policy Research Institute (IFPRI).
    4. César Salazar-Espinoza & Sam Jones, 2017. "The impact of infrastructure shocks on agricultural markets: Evidence from the Zambezi river in Mozambique," WIDER Working Paper Series wp-2017-191, World Institute for Development Economic Research (UNU-WIDER).
    5. Mutambatsere, Emelly & Mabaya, Edward T. & Christy, Ralph D., 2006. "Integration and Equilibrium of Maize Markets in Southern Africa: A SADC Sub-regional Assessment," Working Papers 127056, Cornell University, Department of Applied Economics and Management.
    6. César Salazar & Sam Jones, 2017. "The impact of infrastructure shocks on agricultural markets: Evidence from the Zambezi river in Mozambique," WIDER Working Paper Series 191, World Institute for Development Economic Research (UNU-WIDER).
    7. Kabbiri, Ronald & Dora, Manoj & Elepu, Gabriel & Gellynck, Xavier, 2016. "A Global Perspective of Food Market Integration: A Review," International Journal of Agricultural Sciences and Technology (IJAGST), SvedbergOpen, vol. 55(1-2), May.
    8. Meizal Popat & Garry Griffith & Stuart Mounter & Oscar Cacho, 2022. "Infrastructure investments, regional trade agreements and agricultural market integration in Mozambique," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 14(1), pages 9-22, February.
    9. 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), pages 1-13, October.
    10. 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).

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    Keywords

    Crop Production/Industries; Marketing;

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