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From market liberalization to market development: The need for market institutions in Ethiopia

  • Getnet, Kindie
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    Agricultural market liberalization in the developing countries is entrusted with the objective of increasing agricultural production through improving the economic incentives of farmers and the participation of the private sector in economic activities. Nevertheless, the impact of market liberalization on agricultural production may be limited due to high price risks and high transaction costs faced by economic agents, unless the markets have vested mechanisms to control such problems. Markets fulfill such controlling functions only when they are developed. To such extent, market liberalization is only a necessary but not a sufficient condition to achieve policy objectives sought from the reform process. This study investigates the behavior of grain prices, grain markets, and farmers for a staple food crop around Ambo, Ethiopia, with the purpose of understanding the decision-making environment of economic agents observed during the post-liberalization period. The major evidence is of a liberalized grain marketing system that lacks important institutions and public goods necessary to reduce high price risk and high transaction costs faced by economic agents. In view of this, it is recommended to develop the markets through developing the market institutions and through providing the public goods necessary for an efficient marketing system.

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    File URL: http://www.sciencedirect.com/science/article/B6W8Y-4SDX2PY-1/2/62c0572622bde5cb8d46ccbf417ae4ec
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    Article provided by Elsevier in its journal Economic Systems.

    Volume (Year): 32 (2008)
    Issue (Month): 3 (September)
    Pages: 239-252

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    Handle: RePEc:eee:ecosys:v:32:y:2008:i:3:p:239-252
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    1. Mamingi, Nlandu, 1997. "The impact of prices and macroeconomic policies on agricultural supply: a synthesis of available results," Agricultural Economics, Blackwell, vol. 16(1), pages 17-34, March.
    2. Fackler, Paul L. & Goodwin, Barry K., 2001. "Spatial price analysis," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 17, pages 971-1024 Elsevier.
    3. Barrett, Christopher B., 1997. "Liberalization and food price distributions: ARCH-M evidence from Madagascar," Food Policy, Elsevier, vol. 22(2), pages 155-173, April.
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    5. Akiyama, Takamasa & Baffes, John & Larson, Donald F. & Varangis, Panos, 2003. "Commodity market reform in Africa : some recent experience," Policy Research Working Paper Series 2995, The World Bank.
    6. Ismet, Mohammad & Barkley, Andrew P. & Llewelyn, Richard V., 1998. "Government intervention and market integration in Indonesian rice markets," Agricultural Economics, Blackwell, vol. 19(3), pages 283-295, December.
    7. Kindie Getnet & Wim Verbeke & Jacques Viaene, 2005. "Modeling spatial price transmission in the grain markets of Ethiopia with an application of ARDL approach to white teff," Agricultural Economics, International Association of Agricultural Economists, vol. 33(s3), pages 491-502, November.
    8. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    9. Brennan, Donna, 2003. "Price dynamics in the Bangladesh rice market: implications for public intervention," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 29(1), July.
    10. Smith, Lawrence D., 1997. "Price stabilization, liberalization and food security: conflicts and resolutions?," Food Policy, Elsevier, vol. 22(5), pages 379-392, October.
    11. 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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