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The identification of market exogeneity and market dominance by tests instead of assumption: An application to Indian material

Author

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  • Theodosios B. Palaskas

    (International Development Centre, Queen Elizabeth House, University of Oxford, 21 St Giles, Oxford, OX1 3LA)

  • Barbara Harriss-White

    (International Development Centre, Queen Elizabeth House, University of Oxford, 21 St Giles, Oxford, OX1 3LA)

Abstract

It is normally the case in research on market price to identify the central market either by looking at population data, the volume and directions of flows of commodities, and by identifying nodes on transport networks or by spotting it as the physical centre of regulatory intervention. This however may not be the most safe way to proceed if the geographical flows of a commodity among the domestic markets do not provide strong evidence about the spatial direction of price causation. In the present paper the central market is defined in terms of dominance and exogeneity and a series of tests are provided to help to define and distinguish an exogeneous and dominant (central) market among the marketplace price series. The tests are applied to three crop markets and to three market places in India. The results strongly suggest that it is possible to identify the central market by testing instead of simply by making a more or less empirically justified assumption.

Suggested Citation

  • Theodosios B. Palaskas & Barbara Harriss-White, 1996. "The identification of market exogeneity and market dominance by tests instead of assumption: An application to Indian material," Journal of International Development, John Wiley & Sons, Ltd., vol. 8(1), pages 111-123.
    • Handle: RePEc:wly:jintdv:v:8:y:1996:i:1:p:111-123
    DOI: 10.1002/(SICI)1099-1328(199601)8:1<111::AID-JID271>3.0.CO;2-V
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    References listed on IDEAS

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    1. Heytens, Paul J., 1986. "Testing Market Integration," Food Research Institute Studies, Stanford University, Food Research Institute, vol. 20(1), pages 1-18.
    2. Timmer, C. Peter, 1974. "A Model of Rice Marketing Margins in Indonesia," Food Research Institute Studies, Stanford University, Food Research Institute, vol. 13(2), pages 1-24.
    3. Uma J. Lele, 1967. "Market Integration: A Study of Sorghum Prices in Western India," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 49(1_Part_I), pages 147-159.
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    1. repec:lic:licosd:28811 is not listed on IDEAS
    2. Marcel Fafchamps & Ruth Vargas Hill & Bart Minten, 2008. "Quality control in nonstaple food markets: evidence from India," Agricultural Economics, International Association of Agricultural Economists, vol. 38(3), pages 251-266, May.
    3. Minten, Bart & Reardon, Thomas & Vandeplas, Anneleen, 2009. "Linking urban consumers and rural farmers in India: A comparison of traditional and modern food supply chains," IFPRI discussion papers 883, International Food Policy Research Institute (IFPRI).
    4. P. J. Dawson & P. K. Dey, 2002. "Testing for the law of one price: rice market integration in Bangladesh," Journal of International Development, John Wiley & Sons, Ltd., vol. 14(4), pages 473-484.
    5. T. B. Palaskas & Barbara Harriss-White & Trevor Crowe, 1997. "POLICY ARENA The evolution of local market commodity price behaviour in South India, 1972-92," Journal of International Development, John Wiley & Sons, Ltd., vol. 9(1), pages 101-115.
    6. Bart Minten & Anneleen Vandeplas & Yashodhan Ghorpade & Johan F.M. Swinnen, 2010. "Horticulture Wholesale Trade and Governance in India," Journal of South Asian Development, , vol. 5(1), pages 113-136, April.
    7. Reardon, Thomas & Minten, Bart, 2011. "The quiet revolution in India's food supply chains:," IFPRI discussion papers 1115, International Food Policy Research Institute (IFPRI).

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