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

Zant, Wouter

doi:10.1093/wber/lhs017

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

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Date

2013-01

ISSN

1564-698X

Published

2013-01

Author(s)

Zant, Wouter

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.

Citation

“Zant, Wouter. 2013. How Is the Liberalization of Food Markets Progressing? Market Integration and Transaction Costs in Subsistence Economies. World Bank Economic Review. © Oxford University Press on behalf of the World Bank. http://hdl.handle.net/10986/19085 License: CC BY-NC-ND 3.0 IGO.”