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

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  • Ejrnaes, Mette
  • Persson, Karl Gunnar

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.
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  • Ejrnaes, Mette & Persson, Karl Gunnar, 2000. "Market Integration and Transport Costs in France 1825-1903: A Threshold Error Correction Approach to the Law of One Price," Explorations in Economic History, Elsevier, vol. 37(2), pages 149-173, April.
    • Handle: RePEc:eee:exehis:v:37:y:2000:i:2:p:149-173
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    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.
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    Cited by:

    1. Cassidy, Daniel & Hanley, Nick, 2020. "Regional market integration and the emergence of a Scottish national grain market," eabh Papers 20-05, The European Association for Banking and Financial History (EABH).
    2. Brunt, Liam & Cannon, Edmund, 2013. "Integration in the English wheat market 1770-1820," Discussion Paper Series in Economics 12/2013, Norwegian School of Economics, Department of Economics.
    3. 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.
    4. 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.
    5. 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.
    6. 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.
    7. Rojas, Angela Milena, 2007. "Cliometría: Una comunidad científica en el pseudo-mercado del conocimiento (1957-2006)," Revista Lecturas de Economía, Universidad de Antioquia, CIE, May.
    8. 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.
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    10. 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.
    11. 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.
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    13. 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.
    14. 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.
    15. 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.
    16. 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.
    17. 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.
    18. 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.
    19. 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.
    20. 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).
    21. repec:spo:wpmain:info:hdl:2441/2241 is not listed on IDEAS
    22. 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.
    23. 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.
    24. repec:spo:wpecon:info:hdl:2441/2241 is not listed on IDEAS
    25. 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.

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    More about this item

    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

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