IDEAS home Printed from https://ideas.repec.org/p/kud/kuiedp/9819.html
   My bibliography  Save this paper

Market Integration and Transport Costs in France 1825-1903: A Threshold Error Correction Approach to the Law of One Price

Author

Listed:
  • Mette Ejrnæs

    (Institute of Economics, University of Copenhagen)

  • Karl Gunnar Persson

    (Institute of Economics, University of Copenhagen)

Abstract

This paper argues that the appropriate standard for the analysis of commodity market integration is the transport cost adjusted law of one price. A threshold error correction model that incorporates that property is developed and applied to French wheat prices in the 19th century. This type of modelling acknowledges the fact that error corrections only take place when price differentials between markets exceed transport costs. The method used generates more accurate estimates of the adjustment speed to eqilibrium price differentials between markets and transport costs, which turn out to have a good fit with observed costs. Unlike previous studies this paper shows that French wheat markets were well integrated by the middle of the 19th century.

Suggested Citation

  • Mette Ejrnæs & Karl Gunnar Persson, 1998. "Market Integration and Transport Costs in France 1825-1903: A Threshold Error Correction Approach to the Law of One Price," Discussion Papers 98-19, University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:kuiedp:9819
    DOI: 10.1006/exeh.2000.0733
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1006/exeh.2000.0733
    Download Restriction: no
    File URL: https://libkey.io/10.1006/exeh.2000.0733?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Marc Flandreau, 1996. "Adjusting to the Gold Rush: Endogenous Bullion Points and the French Balance of Payments: 1846-1870," Post-Print hal-03417491, HAL.
    2. Obstfeld, Maurice & Taylor, Alan M., 1997. "Nonlinear Aspects of Goods-Market Arbitrage and Adjustment: Heckscher's Commodity Points Revisited," Journal of the Japanese and International Economies, Elsevier, vol. 11(4), pages 441-479, December.
    3. Weir, David R., 1984. "Life Under Pressure: France and England, 1670–1870," The Journal of Economic History, Cambridge University Press, vol. 44(1), pages 27-47, March.
    4. A. J. H. Latham & Larry Neal, 1983. "The International Market in Rice and Wheat, 1868-1914," Economic History Review, Economic History Society, vol. 36(2), pages 260-280, May.
    5. Chevet, Jean-Michel & Saint-Amour, Pascal, 1992. "L'intégration des marchés du blé en France aux XVIIIe et XIXe siècles," Cahiers d'Economie et de Sociologie Rurales (CESR), Institut National de la Recherche Agronomique (INRA), vol. 22.
    6. Persson,Karl Gunnar, 1999. "Grain Markets in Europe, 1500–1900," Cambridge Books, Cambridge University Press, number 9780521650960, September.
    7. Flandreau, Marc, 1996. "Adjusting to the Gold Rush: Endogenous Bullion Points and the French Balance of Payments 1846-1870," Explorations in Economic History, Elsevier, vol. 33(4), pages 417-439, October.
    8. B.M. Roehner, 1994. "Les mécanismes d'interdépendance spatiale entre marchés du blé au XIXe siècle," Histoire, économie & société, Programme National Persée, vol. 13(2), pages 343-394.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:spo:wpecon:info:hdl:2441/2241 is not listed on IDEAS
    2. Valdes, R. & Von Cramon, S. & Engler, A., 2018. "The role of fuel prices on the wholesale price relationships between horticultural markets," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277064, International Association of Agricultural Economists.
    3. 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.
    4. John E. Murray & Javier Silvestre, 2020. "Integration in European coal markets, 1833–1913," Economic History Review, Economic History Society, vol. 73(3), pages 668-702, August.
    5. Markus Lampe & Paul Sharp, 2014. "Greasing the wheels of rural transformation? Margarine and the competition for the British butter market," Economic History Review, Economic History Society, vol. 67(3), pages 769-792, August.
    6. Rafael, Dobado-González & Alfredo, García-Hiernaux & David, Guerrero-Burbano, 2013. "West versus East: Early Globalization and the Great Divergence," MPRA Paper 48773, University Library of Munich, Germany.
    7. Markus Lampe & Paul Sharp, 2015. "How the Danes discovered Britain: the international integration of the Danish dairy industry before 1880," European Review of Economic History, European Historical Economics Society, vol. 19(4), pages 432-453.
    8. Sahito, Jam Ghulam Murtaza, 2015. "Market integration of wheat in Pakistan," Discussion Papers 72, Justus Liebig University Giessen, Center for international Development and Environmental Research (ZEU).
    9. Ejrnæs, Mette & Persson, Karl Gunnar, 2010. "The gains from improved market efficiency: trade before and after the transatlantic telegraph," European Review of Economic History, Cambridge University Press, vol. 14(3), pages 361-381, December.
    10. Angela Milena Rojas, 2007. "Cliometría: Una comunidad científica en el pseudo-mercado del conocimiento (1957-2006)," Revista Lecturas de Economía, Universidad de Antioquia, CIE.
    11. Cannon, Edmund & Brunt, Liam, 2013. "Integration in the English wheat market 1770-1820," CEPR Discussion Papers 9504, C.E.P.R. Discussion Papers.
    12. repec:spo:wpmain:info:hdl:2441/2241 is not listed on IDEAS
    13. William Hynes & David S. Jacks & Kevin H. O'rourke, 2012. "Commodity market disintegration in the interwar period," European Review of Economic History, European Historical Economics Society, vol. 16(2), pages 119-143, May.
    14. Daniel Cassidy & Nick Hanley, 2020. "Regional market integration and the emergence of a Scottish national grain market," Working Papers 0200, European Historical Economics Society (EHES).
    15. Dobado, Rafael & Marrero, Gustavo A., 2005. "Corn Market Integration in Porfirian Mexico," The Journal of Economic History, Cambridge University Press, vol. 65(1), pages 103-128, March.
    16. Daudin, Guillaume, 2010. "Domestic Trade and Market Size in Late-Eighteenth-Century France," The Journal of Economic History, Cambridge University Press, vol. 70(3), pages 716-743, September.
    17. Lampe, Markus, 2009. "Effects of Bilateralism and the MFN Clause on International Trade: Evidence for the Cobden-Chevalier Network, 1860-1875," The Journal of Economic History, Cambridge University Press, vol. 69(4), pages 1012-1040, December.
    18. Zoltán Bakucs & Štefan Bojnec & Imre Fertő, 2015. "Spatial Product Market Integration between Two Small, Open Neighbouring Economies," Agribusiness, John Wiley & Sons, Ltd., vol. 31(2), pages 171-187, April.
    19. Goodwin, Barry K. & Grennes, Thomas J. & Craig, Lee A., 2002. "Mechanical Refrigeration and the Integration of Perishable Commodity Markets," Explorations in Economic History, Elsevier, vol. 39(2), pages 154-182, April.
    20. Alexander Pütz & Pierre L. Siklos & Christoph Sulewski, 2019. "“Who pays the piper calls the tune” – Networks and transaction costs in commodity markets," CQE Working Papers 8819, Center for Quantitative Economics (CQE), University of Muenster.
    21. repec:hal:wpspec:info:hdl:2441/2241 is not listed on IDEAS
    22. Federico, Giovanni, 2007. "Market integration and market efficiency: The case of 19th century Italy," Explorations in Economic History, Elsevier, vol. 44(2), pages 293-316, April.
    23. Bassino, Jean-Pascal & van der Eng, Pierre, 2019. "Japan and the Asian Divergence: Market Integration, Climate Anomalies and Famines during the 18th and 19th Centuries," CEI Working Paper Series 2018-18, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    24. repec:hal:spmain:info:hdl:2441/2241 is not listed on IDEAS
    25. Cormac Ó Gráda, 2002. "Adam Smith and Amartya Sen : markets and famines in pre-industrial Europe," Working Papers 200218, School of Economics, University College Dublin.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jacks, David S., 2005. "Intra- and international commodity market integration in the Atlantic economy, 1800-1913," Explorations in Economic History, Elsevier, vol. 42(3), pages 381-413, July.
    2. Flandreau, Marc, 1998. "The burden of intervention: externalities in multilateral exchange rates arrangements," Journal of International Economics, Elsevier, vol. 45(1), pages 137-171, June.
    3. Federico, Giovanni, 2007. "Market integration and market efficiency: The case of 19th century Italy," Explorations in Economic History, Elsevier, vol. 44(2), pages 293-316, April.
    4. Claude Diebolt & Antoine Parent, 2006. "Were there Anomalies in the Sterling-Franc Exchange Rate Regulation during the Mid-19th Century?," Working Papers 06-08, Association Française de Cliométrie (AFC).
    5. Diebolt, Claude & Parent, Antoine, 2008. "Bimetallism: The "rules of the game"," Explorations in Economic History, Elsevier, vol. 45(3), pages 288-302, July.
    6. Daniel Buncic, 2012. "Understanding forecast failure of ESTAR models of real exchange rates," Empirical Economics, Springer, vol. 43(1), pages 399-426, August.
    7. repec:onb:oenbwp:y::i:29:b:1 is not listed on IDEAS
    8. Yuzuru Kumon & Mohamed Saleh, 2023. "The Middle‐Eastern marriage pattern? Malthusian dynamics in nineteenth‐century Egypt," Economic History Review, Economic History Society, vol. 76(4), pages 1231-1258, November.
    9. Cheung, Yin-Wong (ed.), 2012. "The Evolving Role of China in the Global Economy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262018234, December.
    10. repec:spo:wpecon:info:hdl:2441/2241 is not listed on IDEAS
    11. Jonathan Haskel & Holger Wolf, 2001. "The Law of One Price—A Case Study," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(4), pages 545-558, December.
    12. Philip Hans Franses & Dick van Dijk, 2006. "A simple test for PPP among traded goods," Applied Financial Economics, Taylor & Francis Journals, vol. 16(1-2), pages 19-27.
    13. Timothy W. Guinnane & Sheilagh C. Ogilvie, 2013. "A Two-Tiered Demographic System: "Insiders" and "Outsiders" in Three Swabian Communities, 1558-1914," Working Papers 1021, Economic Growth Center, Yale University.
    14. Islam Hassouneh & Teresa Serra & José M. Gil, 2010. "Price transmission in the Spanish bovine sector: the BSE effect," Agricultural Economics, International Association of Agricultural Economists, vol. 41(1), pages 33-42, January.
    15. Anderton Robert & Richard Baldwin & Daria Taglioni, 2007. "The impact of monetary union on trade prices," Journal of Financial Transformation, Capco Institute, vol. 19, pages 35-48.
    16. Cheung, Yin-Wong & Lai, Kon S. & Bergman, Michael, 2004. "Dissecting the PPP puzzle: the unconventional roles of nominal exchange rate and price adjustments," Journal of International Economics, Elsevier, vol. 64(1), pages 135-150, October.
    17. Frédérique Bec & Mélika Ben Salem & Marine Carrasco, 2010. "Detecting Mean Reversion in Real Exchange Rates from a Multiple Regime star Model," Annals of Economics and Statistics, GENES, issue 99-100, pages 395-427.
    18. Kleopatra Nikolaou, 2007. "The behaviour of the real exchange rate: Evidence from regression quantiles," Money Macro and Finance (MMF) Research Group Conference 2006 46, Money Macro and Finance Research Group.
    19. Jyh‐Lin Wu & Pei‐Fen Chen & Ching‐Nun Lee, 2009. "Purchasing Power Parity, Productivity Differentials And Non‐Linearity," Manchester School, University of Manchester, vol. 77(3), pages 271-287, June.
    20. Christian Rohe, 2016. "On shock symmetry in South America: New evidence from intra-Brazilian real exchange rates," CQE Working Papers 5316, Center for Quantitative Economics (CQE), University of Muenster.
    21. Jinzhao Chen, 2012. "Crisis, Capital Controls and Covered Interest Parity: Evidence from China in Transformation," PSE Working Papers halshs-00660654, HAL.
    22. Ahmad, Yamin S., 2008. "The effects of small sample bias in Threshold Autoregressive models," Economics Letters, Elsevier, vol. 101(1), pages 6-8, October.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • N73 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Europe: Pre-1913
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kud:kuiedp:9819. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Thomas Hoffmann (email available below). General contact details of provider: https://edirc.repec.org/data/okokudk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.