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Missed opportunities and missing markets: Spatio-temporal arbitrage of rice in Madagascar

  • Moser, Christine M.
  • Barrett, Christopher B.
  • Minten, Bart

This paper uses an exceptionally rich data set to test the extent to which markets in Madagascar are integrated across space, time, and form (in converting from paddy to rice) and to explain some of the factors that limit arbitrage and price equalization within a single country. In particular, we use rice price data across four quarters of 2000-2001 along with data on transportation costs and infrastructure availability for nearly 1400 communes in Madagascar to examine the extent of market integration at three different spatial scales sub-regional, regional, and national and determine whether non-integration is due to high transfer costs or lack of competition. The results indicate that markets are fairly well integrated at the sub-regional level and that factors such as high crime, remoteness, and lack of information are among the factors limiting competition. A lack of competition persists at the regional level and high transfer costs impede spatial market integration at the national level. Only six percent of rural communes appear to be intertemporally integrated and there appear to be significant untapped opportunities for interseasonal arbitrage. Income is directly and strongly related to the probability of a commune being in interseasonal competitive equilibrium.

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File URL: http://purl.umn.edu/19338
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Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2005 Annual meeting, July 24-27, Providence, RI with number 19338.

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Date of creation: 2005
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Handle: RePEc:ags:aaea05:19338
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  1. repec:cup:cbooks:9780521326162 is not listed on IDEAS
  2. Marcel Fafchamps & Eleni Gabre-Madhin & Bart Minten, 2002. "Increasing Returns and Market Efficiency in Agricultural Trade," CSAE Working Paper Series 2002-18, Centre for the Study of African Economies, University of Oxford.
  3. Fafchamps, Marcel & Minten, Bart, 1999. "Property rights in a flea market economy," MTID discussion papers 27, International Food Policy Research Institute (IFPRI).
  4. Deaton, Angus & Laroque, Guy, 1992. "On the Behaviour of Commodity Prices," Review of Economic Studies, Wiley Blackwell, vol. 59(1), pages 1-23, January.
  5. 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.
  6. Marcel Fafchamps & Christine Moser, 2003. "Crime, Isolation, and Law Enforcement," Economics Series Working Papers 140, University of Oxford, Department of Economics.
  7. Christopher B. Barrett & Paul A. Dorosh, 1996. "Farmers' Welfare and Changing Food Prices: Nonparametric Evidence from Rice in Madagascar," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(3), pages 656-669.
  8. 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.
  9. Barrett, Christopher B., 1997. "Food marketing liberalization and trader entry: Evidence from Madagascar," World Development, Elsevier, vol. 25(5), pages 763-777, May.
  10. Timmer, C. Peter, 1974. "A Model of Rice Marketing Margins in Indonesia," Food Research Institute Studies, Stanford University, Food Research Institute, issue 02.
  11. Deaton, Angus & Laroque, Guy, 1996. "Competitive Storage and Commodity Price Dynamics," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 896-923, October.
  12. Li, Jau-Rong & Barrett, Christopher B., 1999. "Distinguishing Between Equilibrium And Integration In Markets Analysis," Working Papers 14607, International Agricultural Trade Research Consortium.
  13. Christopher B. Barrett, 1996. "Market Analysis Methods: Are Our Enriched Toolkits Well Suited to Enlivened Markets?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(3), pages 825-829.
  14. Marcel Fafchamps, 2002. "Returns to social network capital among traders," Oxford Economic Papers, Oxford University Press, vol. 54(2), pages 173-206, April.
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