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Domestic Market Integration

Author

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  • Arvind Virmani

    (Indian Council for Research on International Economic Relations)

  • Surabhi Mittal

    (Indian Council for Research on International Economic Relations)

Abstract

The paper looks into the level of integration of commodity markets in India, across centres and states using consumer price data. It measures the extent to which domestic markets for goods in India are integrated, and recommends policy options to facilitate integration. The paper addresses questions: Are domestic markets for goods integrated across states? Has market integration increased over time? What are the policy options to facilitate integration? The paper tests the methodology proposed by Bradford and Lawrence (2004) on the consumer prices of goods in major states across India. This is then repeated using consumer price data at two points in time (1994 and 2004), allowing an assessment of whether Indian markets have integrated over time. Market integration is also tested for individual commodities across markets. The annual consumer prices for commodities were compiled from the Labour Bureau series of average monthly consumer prices of commodities for Industrial workers across 70 constituent centres in 18 states and monthly data was compiled from the Indian Labour Journal, a monthly publication from Labour Bureau, Ministry of Labour Government of India. Authors are thankful to Labour Bureau, Shimla for providing data on consumer prices at the disaggregated level. This study was commissioned by The World Bank as the background paper on market integration in The World Bank Development Policy Review: Inclusive Growth and Service Delivery: Building on India's Success. July 2006

Suggested Citation

  • Arvind Virmani & Surabhi Mittal, 2006. "Domestic Market Integration," Indian Council for Research on International Economic Relations, New Delhi Working Papers 183, Indian Council for Research on International Economic Relations, New Delhi, India.
    • Handle: RePEc:ind:icrier:183
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    References listed on IDEAS

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    1. Pinelopi Koujianou Goldberg & Michael M. Knetter, 1997. "Goods Prices and Exchange Rates: What Have We Learned?," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1243-1272, September.
    2. Martin Ravallion, 1986. "Testing Market Integration," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(1), pages 102-109.
    3. Bob Baulch, 1997. "Transfer Costs, Spatial Arbitrage, and Testing for Food Market Integration," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 477-487.
    4. Eric Monke & Todd Petzel, 1984. "Market Integration: An Application to International Trade in Cotton," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 66(4), pages 481-487.
    5. Michael M. Knetter & Matthew J. Slaughter, 1999. "Measuring Product-Market Integration," NBER Working Papers 6969, National Bureau of Economic Research, Inc.
    6. Meyer, Jochen, 2004. "Measuring market integration in the presence of transaction costs--a threshold vector error correction approach," Agricultural Economics, Blackwell, vol. 31(2-3), pages 327-334, December.
    7. Scott Bradford & Robert Z. Lawrence, 2004. "Has Globalization Gone Far Enough: The Costs of Fragmented Markets," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 349, April.
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    Cited by:

    1. Surabhi Mittal, 2007. "Can Horticulture be a Success Story for India?," Working Papers id:1159, eSocialSciences.
    2. Kennedy, Loraine & Robin, Kim & Zamuner, Diego, 2013. "Comparing State-level policy responses to economic reforms in India," Revue de la Régulation - Capitalisme, institutions, pouvoirs, Association Recherche et Régulation, vol. 13.
    3. Jha, A.K. & Singh, K.M. & Singh, R.K.P., 2013. "Wholesale Milk Markets: A Study of Market Integration in Indian Markets," MPRA Paper 47721, University Library of Munich, Germany, revised 19 Jun 2013.
    4. Boffa,Mauro & Varela,Gonzalo J., 2019. "Integration and Price Transmission in Key Food Commodity Markets in India," Policy Research Working Paper Series 8755, The World Bank.
    5. Sanogo, Issa & Maliki Amadou, Mahamane, 2010. "Rice market integration and food security in Nepal: The role of cross-border trade with India," Food Policy, Elsevier, vol. 35(4), pages 312-322, August.

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    More about this item

    Keywords

    Market Integration; Consumer Prices; Primary Food; Manufactured Goods; India;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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