Spatial Integration of White Wheat Markets in Ethiopia: Along with Improvements in Transport Infrastructure
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Date
2006-07
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Addis Ababa University
Abstract
This paper attempts to analyze the impact road infrastructure may have on the level and
degree of grain market integration on selected Ethiopian markets. Using wholesale price
series of six markets and based on monthly data from January 1996 to December 2005, which
is disaggregated in the pre and post construction periods, one of the major staple food crops of
the country, white wheat is analyzed. The other two major crops, teff and maize were also
considered in the descriptive analysis.
A threshold autoregressive (TAR) Model in the form of Error Correction Model is used to
evaluate the level of integration and speed of adjustment towards equilibrium. The findings of
the paper show that there is enough evidence to conclude that the deficit areas are isolated
from Addis while the surplus areas were found to be well integrated in both periods. Some of
the markets under consideration are found to be inefficient as smaller deviations than the
threshold level from the long term equilibrium tend to be cleared (arbitraged) away; the
results also show that the markets under consideration, could be clustered in to three market
groups, that is the surplus areas including Addis, in one group and the two deficit areas each
in other groups independently, isolated from Addis. The findings imply that any agricultural
grain marketing policy should realize and be aimed at these three segregated groups,
separately. The results suggest that geographic differences and distance are important factors
affecting spatial markets integration between Addis and the regional markets. The results also
propose, the requirement of government intervention mechanisms, such as availability of
information (access to local media and telecommunications facilities), as key factors to
improve spatial market integration between the markets. Moreover, as construction of roads
alone hasn’t as such improved and produced a significant impact on the level of market
integration, the results indicate the need for a coordinated effort of the other market enhancing
instruments; market information and institutions and put forward a system of commodity
exchange as a mechanism that can incorporate these instruments.
Key words: Market integration, threshold level, Monte Carlo simulations, wheat, and
construction of roads.
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Keywords
Market integration, threshold level, Monte Carlo simulations, and construction of roads