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How Is the Liberalization of Food Markets Progressing? Market Integration and Transaction Costs in Subsistence Economies

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  • Wouter Zant

Abstract

We propose a modification of Baulch's parity bounds model to measure the market integration of food markets in developing countries. Instead of extrapolating a single observation of transaction costs, we estimate transaction costs. Predicted transaction costs compare well with survey data of traders. Probabilities of market regimes, computed on the basis of predicted transaction costs, fluctuate significantly and do not support fixed regime probabilities over time. The probability of market integration with trade decreases consistently during food shortages, increasing either the probability of no trade or loss-making trade or the probability of profitable but unexploited trade opportunities. The data further support a negative trend in market integration with trade. Copyright 2013, Oxford University Press.

Suggested Citation

  • Wouter Zant, 2013. "How Is the Liberalization of Food Markets Progressing? Market Integration and Transaction Costs in Subsistence Economies," The World Bank Economic Review, World Bank, vol. 27(1), pages 28-54.
    • Handle: RePEc:oup:wbecrv:v:27:y:2013:i:1:p:28-54
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    File URL: http://hdl.handle.net/10.1093/wber/lhs017
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    Cited by:

    1. Ofentse, Goetswamang Phankie, 2022. "Evaluation of the prospects of hedging Botswana's maize prices against the Johannesburg Stock Exchange Commodity Market Derivative," Research Theses 334751, Collaborative Masters Program in Agricultural and Applied Economics.
    2. Ralandison, Tsilavo & Arimoto, Yutaka & Kono, Hisaki & Sakurai, Takeshi & Takahashi, Kazushi, 2018. "Rice flows across regions in Madagascar," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 13(01), March.
    3. Wouter Zant, 2012. "Is EU Support to Malawi Agriculture Effective?," Tinbergen Institute Discussion Papers 12-090/V, Tinbergen Institute.
    4. Robinson, Amanda Lea, 2016. "Internal Borders: Ethnic-Based Market Segmentation in Malawi," World Development, Elsevier, vol. 87(C), pages 371-384.
    5. Brenton, Paul & Portugal-Perez, Alberto & Regolo, Julie, 2014. "Food prices, road infrastructure, and market integration in Central and Eastern Africa," Policy Research Working Paper Series 7003, The World Bank.
    6. Wouter (W.) Zant, 2017. "Bridges," Tinbergen Institute Discussion Papers 17-117/V, Tinbergen Institute, revised 06 Apr 2019.
    7. Wouter Zant, 2019. "Mobile Phones and Mozambique Traders: What is the Size of Reduced Search Costs and Who Benefits?," Tinbergen Institute Discussion Papers 19-047/V, Tinbergen Institute.
    8. Maureen Teresa Odongo & Roseline Nyakerario Misati & Anne Wangari Kamau & Kethi Ngoka Kisingu, 2022. "Climate Change and Inflation in Eastern and Southern Africa," Sustainability, MDPI, vol. 14(22), pages 1-17, November.
    9. Olivier Massol & Emmanuel Hache & Albert Banal‐Estañol, 2024. "Trade sanctions and international market integration: Evidence from the sanctions on Iranian methanol exports," The World Economy, Wiley Blackwell, vol. 47(2), pages 637-663, February.
    10. Xinru Miao & Shaopeng Wang & Jiqin Han & Zhaoyi Ren & Teng Ma & Henglang Xie, 2024. "The Regional Heterogeneity of the Impact of Agricultural Market Integration on Regional Economic Development: An Analysis of Pre-COVID-19 Data in China," Sustainability, MDPI, vol. 16(5), pages 1-33, February.
    11. Wouter Zant, 2023. "How costly is using livestock as a savings device?," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 15(1), pages 77-110, February.
    12. Zhang, Jian & Mishra, Ashok K. & Hirsch, Stefan, 2021. "Market-oriented agriculture and farm performance: Evidence from rural China," Food Policy, Elsevier, vol. 100(C).
    13. Wouter Zant, 2022. "Measuring Trade Cost Reductions Through a New Bridge in Mozambique: Who Benefits From Transport Infrastructure?," Journal of African Economies, Centre for the Study of African Economies, vol. 31(4), pages 384-408.
    14. Wouter Zant, 2020. "How Costly is using Livestock as a Saving Device? A Note on Meat Prices during Food Shortages," Tinbergen Institute Discussion Papers 20-021/V, Tinbergen Institute, revised 31 Jun 2020.
    15. Wouter Zant, 2018. "Trains, Trade, and Transaction Costs: How Does Domestic Trade by Rail Affect Market Prices of Malawi Agricultural Commodities?," The World Bank Economic Review, World Bank, vol. 32(2), pages 334-356.
    16. Olivier Massol & Albert Banal-Estanol, 2018. "Market Power and Spatial Arbitrage between Interconnected Gas Hubs," The Energy Journal, , vol. 39(2_suppl), pages 67-96, December.
    17. Von Cramon-Taubadel, Stephan, 2017. "The analysis of market integration and price transmission – results and implications in an African context," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 56(2), March.

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