Shocks to Food Market Systems: A Network Approach

Abstract

We estimate external and domestic food market linkages in Tanzania to better understand the cross-border transmission of shocks. We employ a market-network approach to show that i) The largest city is not a major source of influence; ii) Demand shocks emanate from border markets that may serve as conduits for informal trade and iii) Prices in the high potential areas are especially sensitive to systemic shocks. Taken together, our analysis suggests that an interventionist trade policy is not an alternative to remedying the inefficiencies that stem from inadequate rural infrastructure. More broadly, the method described in this paper may be used to develop a more precise understanding of the origins of external shocks to domestic food markets.

Keywords: Price Transmission, Market Integration, Tanzania, Food Prices, Market Networks, Trade Policy, Commodity Markets

JEL Classification: E31, O13, Q02, Q13, Q18