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

39 Pages Posted: 20 Apr 2016

See all articles by Wouter Zant

Wouter Zant

Vrije Universiteit Amsterdam, School of Business and Economics; Tinbergen Institute

Date Written: January 1, 2013

Abstract

The paper proposes 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, it estimates 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 support a negative trend in market integration with trade.

Keywords: Markets and Market Access, Transport Economics Policy & Planning, Debt Markets, Economic Theory & Research, Food & Beverage Industry

Suggested Citation

Zant, Wouter, How is the Liberalization of Food Markets Progressing? Market Integration and Transaction Costs in Subsistence Economies (January 1, 2013). World Bank Policy Research Working Paper No. 6331, Available at SSRN: https://ssrn.com/abstract=2205749

Wouter Zant (Contact Author)

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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