Market integration of white teff (Eragrostis tef) in Ethiopia: a parity bound model

Agriculture drives economic growth, food security, and employment in developing countries, while efficient markets enhance trade and optimise resource allocation, though disparities and the need for reforms remain. This study aims to analyze the vertical market integration of white teff (Eragrostis tef) between North Shewa Zone districts’ and Addis Ababa markets and to assess the impact of COVID-19 on market integration. This study addresses two research questions: (1) Is there vertical market integration of white teff between the North Shewa Zone districts’ and Addis Ababa markets? (2) Does COVID-19 have an impact on vertical market integration of white teff? Secondary data on prices of white teff was collected from government offices, while primary data on transaction costs (TC) and related variables was collected from traders. The Parity Bound Model (PBM) and Extended Parity Bound Model (EPBM) are used to analyze vertical market integration and assess the impact of COVID-19 on market integration, respectively. The t-test revealed that the majority of the markets have significant price differences (p-value = 0.68) while other markets are segmented (λ3 > = 0.72). EPBM results show a decrease in probabilities for regime one (λ1 = 0.13, δ1 = −0.13) and regime two (λ2 = 0.13, δ2 = −0.13) and an increase for regime three (λ3 = 0.75, δ3 = 0.255), but the likelihood ratio test (χ2cal = 1.842; χ2(2) = 5.99) revealed no significant change on market integration due to COVID-19. To enhance rural market integration, it's recommended to improve infrastructure such as roads and market information systems.