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Estimating the Degree of Market Integration

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  • Paul L. Fackler
  • Hüseyin Tastan

Abstract

Existing tests of spatial market integration are commonly based on statistical criteria without an explicit link to an economic model of price determination. This article proposes new measures of market integration defined directly in terms of a well-known spatial price determination model and develops an econometric methodology for estimating these measures. Due to the intractability of the conditional density function of prices, we use indirect inference to estimate the model parameters and market integration measures. The methodology is illustrated with simulated data and is applied to soybean price data for the United States, Brazil, and the EU. Copyright 2008, Oxford University Press.

Suggested Citation

  • Paul L. Fackler & Hüseyin Tastan, 2008. "Estimating the Degree of Market Integration," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(1), pages 69-85.
    • Handle: RePEc:oup:ajagec:v:90:y:2008:i:1:p:69-85
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    File URL: http://hdl.handle.net/10.1111/j.1467-8276.2007.01058.x
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    Cited by:

    1. Ma, Meilin & Delgado, Michael S. & Wang, H. Holly, 2024. "Risk, arbitrage, and spatial price relationships: Insights from China's hog market under the African Swine Fever," Journal of Development Economics, Elsevier, vol. 166(C).
    2. Anna M. Klepacka & Wojciech J. Florkowski & Cesar Revoredo-Giha, 2021. "Can Family Farms Depend on Price Information? Testing Butter and Curd Price Integration in Poland," Agriculture, MDPI, vol. 11(5), pages 1-16, May.
    3. Zant, Wouter, 2010. "Market Integration with Transaction Costs in Developing Country Staple Food Markets: the Case of the Malawi Maize market," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa 95777, African Association of Agricultural Economists (AAAE).
    4. Constas, Mark A. & d’Errico, Marco & Hoddinott, John F. & Pietrelli, Rebecca, "undated". "Resilient food systems – A proposed analytical strategy for empirical applications," ESA Working Papers 319840, Food and Agriculture Organization of the United Nations, Agricultural Development Economics Division (ESA).
    5. Joe Dewbre & Céline Giner & Wyatt Thompson & Martin Von Lampe, 2008. "High food commodity prices: will they stay? who will pay?," Agricultural Economics, International Association of Agricultural Economists, vol. 39(s1), pages 393-403, November.
    6. Stephens, Emma C. & Mabaya, Edward T., 2008. "Spatial Price Adjustment with and without Trade," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6538, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    7. Sergio H. Lence & GianCarlo Moschini & Fabio Gaetano Santeramo, 2018. "Threshold cointegration and spatial price transmission when expectations matter," Agricultural Economics, International Association of Agricultural Economists, vol. 49(1), pages 25-39, January.
    8. Isaac Abunyuwah & Henry De-Graft Acquah, 2013. "Modelling non-linear Spatial Market Integration and Equilibrium Processes in Hidden Markov Framework," Journal of Economics and Behavioral Studies, AMH International, vol. 5(8), pages 535-545.
    9. Araujo-Enciso, Sergio Rene, 2011. "The Takayama and Judge Price and Allocation Model and its Application in Non-linear Techniques for Spatial Market Integration," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114225, European Association of Agricultural Economists.
    10. Littleboy, Chris, 2022. "A study of scarcity: assessing the availability and value of surplus land in Nigeria," Land Use Policy, Elsevier, vol. 113(C).
    11. Atle Oglend & Frank Asche & Hans‐Martin Straume, 2022. "Estimating Pricing Rigidities in Bilateral Transactions Markets," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(1), pages 209-227, January.
    12. Laura Panza, 2024. "From a common empire to colonial rule: Commodity market disintegration in the Near East," Economic History Review, Economic History Society, vol. 77(2), pages 584-611, May.
    13. Tomoko Hasegawa & Ronald D. Sands & Thierry Brunelle & Yiyun Cui & Stefan Frank & Shinichiro Fujimori & Alexander Popp, 2020. "Food security under high bioenergy demand toward long-term climate goals," Climatic Change, Springer, vol. 163(3), pages 1587-1601, December.
    14. Ihle, Rico & Amikuzuno, Joseph, 2009. "The Integration of Tomato Markets in Ghana with and without Direct Trade Flows," 2009 Conference, August 16-22, 2009, Beijing, China 51402, International Association of Agricultural Economists.
    15. Christine Moser & Christopher Barrett & Bart Minten, 2009. "Spatial integration at multiple scales: rice markets in Madagascar," Agricultural Economics, International Association of Agricultural Economists, vol. 40(3), pages 281-294, May.
    16. Yuanlong Ge & Holly H. Wang & Sung K. Ahn, 2010. "Cotton market integration and the impact of China's new exchange rate regime," Agricultural Economics, International Association of Agricultural Economists, vol. 41(5), pages 443-451, September.
    17. Tiia‐Maria Pasanen & Miikka Voutilainen & Jouni Helske & Harri Högmander, 2022. "A Bayesian spatio‐temporal analysis of markets during the Finnish 1860s famine," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 71(5), pages 1282-1302, November.
    18. Abunyuwah, Isaac, 2013. "Implications of conceptual and data complexities on time-series econometric applications in market integration analysis," Studies in Agricultural Economics, Research Institute for Agricultural Economics, vol. 115(1), pages 1-7, February.
    19. Hüseyin Taştan & Yılmaz Köprücü, 2023. "Examining spatial market efficiency under different marketing regulations: The case of Turkish lemon markets," Agricultural Economics, International Association of Agricultural Economists, vol. 54(5), pages 709-727, September.
    20. Stephan von Cramon-Taubadel, 2017. "The analysis of market integration and price transmission – results and implications in an African context," Agrekon, Taylor & Francis Journals, vol. 56(2), pages 83-96, April.
    21. O'Brien, Daniel M., 2009. "The Effects of the Micro-Market Structure for Kansas Grain Elevators on Spatial Grain Price Differentials," 2009 Conference, April 20-21, 2009, St. Louis, Missouri 53041, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    22. Madhusudan Ghosh, 2010. "Spatial Price Linkages in Regional Food Grain Markets in India," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 4(4), pages 495-516, November.
    23. Ivan Diaz‐Rainey & Mathias Siems & John K. Ashton, 2011. "The financial regulation of energy and environmental markets," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 19(4), pages 355-369, November.

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