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Exploring Spatial Price Relationships: The Case of African Swine Fever in China

In: Risks in Agricultural Supply Chains

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  • Michael Delgado
  • Meilin Ma
  • H. Holly Wang

Abstract

We use a temporary ban on inter-province shipping of live hogs induced by the 2018 outbreak of African Swine Fever (ASF) in China as a natural experiment to study spatial mechanisms behind the dynamics of market integration. With a unique dataset of weekly provincial hog prices, we employ a novel spatial network model to estimate the strength of price co-movement across provinces pre and post the ban. Results indicate that, in the highly integrated national market prior to the ban, longer geographical distances between two provinces did not weaken the strength of their price linkage. The ban broken down spatial integration. Longer distances became a significant obstacle to spatial price linkage in the post-ban periods, implying faster re-integration of hog prices between proximate provinces than remote ones. The negative effect of distance can be rationalized by the interplay between arbitrage opportunities and imperfect information. Our findings highlight information transparency as a key to market integration post shipping bans used to curb animal pandemics like ASF.
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  • Michael Delgado & Meilin Ma & H. Holly Wang, 2021. "Exploring Spatial Price Relationships: The Case of African Swine Fever in China," NBER Chapters, in: Risks in Agricultural Supply Chains, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:14612
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    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. Yan, Zhen & Han, Fei & Wang, Holly & Shen, Yun & Zhou, Jiehong, 2024. "Purchasing habits, age effects and Chinese consumers' willingness to pay for chilled pork: Evidence from a random Nth-price auction experiment," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 68(02), January.
    3. Gale, Fred & Kee, Jennifer & Huang, Joshua, 2023. "How China’s African Swine Fever Outbreaks Affected Global Pork Markets," Economic Research Report 338956, United States Department of Agriculture, Economic Research Service.
    4. Lin, Wen & Ma, Baojie & Liang, Jiangyuan & Jin, Shaosheng, 2024. "Price response to government disclosure of food safety information in developing markets," Food Policy, Elsevier, vol. 123(C).

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    More about this item

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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