Cattle Markets Integration and Price Discovery: The Case of Mali

This article analyses the level of integration in 10 cattle markets in Mali. The results indicate a limited interdependence among markets where, in majority of cases, more than 70 per cent of price variation is due to own-price shocks. However, the Ségou market exhibited a high level of interaction with other markets, behaving mostly as a price information receiver. Some markets behaved as sources of price information, however, without taking a clear price leadership role. This low level of market integration may be attributed to limited access to livestock markets and timely price information.     

Urban Wage Behaviour and Food Price Inflation in Ethiopia

Theoretically, increases in food prices could benefit the poor by increasing the demand for unskilled labour, and hence their wages. This paper tests this hypothesis in urban Ethiopia. We exploit a unique panel of monthly price and wage data from 111 urban markets to first construct welfare-relevant measures of real wages, before employing various panel estimators to formally test wage-food price integration. We find moderate rates of long-run adjustment to increases in food prices, but that adjustment is very slow. This implies highly adverse short-run welfare impacts of higher food prices on the urban poor.     

Weather Shocks and Spatial Market Efficiency: Evidence from Mozambique

The aim of this paper is to study the association between weather shocks (droughts and floods) and agricultural market performance in Mozambique. To do so, we employ a dyadic regression analysis on monthly maize prices, transport costs, and spatial identification of markets as well as droughts and flooded areas. Our estimates show that, while a drought reduces price differences between markets, price dispersion increases during flood periods, an effect that is mainly driven by increases in transport costs. Finally, floods are found to affect price differences more if markets are closer to each other and if the road infrastructure quality is poor. An important implication of our results is that markets show some degree of efficiency during supply shock periods in Mozambique. However, spatial market integration continues to be insufficient, probably due to high transfer costs.     

The inadequacy of the entitlement approach to explain and remedy famines

The article suggests further improvements in the methodology to analyse market integration. It provides corrections to and methodological extensions of recent work in this journal. It also presents a way of applying market integration techniques to the analysis of shocks such as market liberalisation and war. The method is applied to the effects of liberalisation and the end of the civil war on food markets in Ethiopia. The conclusion is that liberalisation had important effects on the long‐run and short‐run integration of food markets.     

Empirical Investigation into Spatial Integration Without Direct Trade: Comparative Analysis Before and After the Establishment of the Ethiopian Commodity Exchange

This paper presents a comparative analysis of the spatial price cointegration of coffee markets in Ethiopia in the pre and post Ethiopian Commodity Exchange (ECX) era using the autoregressive distributed lag (ARDL) cointegration framework. The study takes into consideration a market condition in which government policy restricts arbitrage coffee trade between coffee producing areas. Using coffee price data from 1998–2013 and applying a bounds test approach and Toda–Yamamoto Granger causality test, the study finds that the establishment of ECX has strengthened regional integration rather than a national harmony between producer markets. We also find evidence that, since the establishment of ECX, an opportunity was created for high quality coffee to dominate price formation while also allowing lower quality coffee producing areas to establish themselves. The study underlines the importance of market transparency and exchange of price information between producer markets.     

The Structure of Indigenous Food Crop Markets in sub-Saharan Africa: The Rice Market in Uganda

Using data obtained from a series of nation-wide market surveys in Uganda, this article attempts to document and assess the domestic rice market at all stages in the post-harvest marketing chain from the farm gate to metropolitan area retail outlets. The criteria used are quantities marketed, prices, marketing margins, marketing costs and net returns to traders. The results show that the regional rice markets are integrated into the national market and that on average little surplus is left for rice traders at all market stages if marketing costs are accounted for. The spontaneously developed indigenous crop market works reasonably well.     

The Impact of Trade Liberalisation on Household Welfare in a Developing Country with Imperfect Labour Markets

Abstract

I develop an empirical methodology to assess the distributional impact of trade-induced price shocks when labour markets are imperfect. The proposed methodology relates exogenous variations in prices to changes in household welfare using a separable agricultural household model that flexibly allows the data to determine the degree of labour market imperfections. Applying this approach to Vietnam, I investigate the impact of agriculture trade liberalisation between 1993 and 1998 on overall household welfare, measured using per capita household expenditure. I find that accounting for labour market imperfections results in welfare gains that are nearly four times larger than those found when assuming complete labour markets.     

Savings,investment and foreign capital flows: Have capital markets become more integrated?

How mobile is capital across countries? Does the expansion of world financial markets in the 1970s and 1980s reflect a tendency towards one integrated world capital market, accessible for both industrialised and developing countries? Or, alternatively, are savings and investment rates for each economy closely tied because of international capital market imperfections? This article critically assesses recent studies that have tested these hypotheses empirically for industrialised countries, presents new evidence and expands data analysis to include the group of developing countries. Contrary to recent studies it is concluded that across industrialised countries domestic investment and savings are now much less closely linked than in the 1960s. But the larger capital market integration does not extend to the group of developing countries despite their increased use of funds from international financial markets to finance domestic investment. The exploratory nature of the data analysis only permits to draw some suggestive, though important, conclusions for economic theory and policy.     

Food Price Volatility and Vulnerability in the Global South: considering the global economic context

Abstract

Most official analyses of the recent food price crisis have focused on the market fundamentals of supply and demand for food as key explanatory factors. As a result, most of the policy recommendations emanating from the major international institutions include measures to boost supply and temper demand. In this paper I argue that international macroeconomic factors played a key role in fostering both price volatility and vulnerability, and as such they need to be recognised. With respect to the recent price volatility, the weak US dollar and speculation on agricultural commodities futures markets greatly influenced agricultural prices. With respect to price vulnerability, global economic forces played an important role in dampening production incentives in the world's poorest countries over the past 30 years, leading to a situation of food import dependence. Policy responses to the food crisis must consider the role of these broader international macroeconomic forces—both in the immediate context and their longer term impact.     

Cointegration and market integration: An application to the Indonesian rice market

This article suggests improvements in the use of regression analysis to measure spatial market integration. The procedure pioneered by Ravallion is still widespread but is valid only under certain conditions of exogeneity. The alternative offered here is an error‐correction mechanism which makes it possible to test for exogeneity as well as indicating the direction and strength of causality in price formation between markets. The method is illustrated with data on rice prices in different parts of the Indonesian market. The results confirm, among other things, that supply sources are more important than demand sources in driving prices.     

The impact of domestic and global trade liberalisation on five Southern African countries

We compare the impact of alternative domestic and global trade liberalisation scenarios on five economies in Southern Africa. The study applies a computable general equilibrium model that employs standardised 12-sector social accounting matrices for Malawi, Mozambique, Tanzania, Zambia and Zimbabwe. The approach incorporates stylised features, such as own-household consumption and marketing margins, that are of particular importance when a majority of agricultural producers are not sufficiently integrated into formal markets and thus rely on own production to meet their daily diets. Hence, improved infrastructure implies lower marketing costs and better market integration, which translates to increased production opportunities. The comparison of the results across all five countries reveals that common policy measures have different impacts depending on the underlying economic structures.     

Exchange Rate Pass-Through in Developing and Emerging Markets: A Survey of Conceptual,Methodological and Policy Issues,and Selected Empirical Findings

Abstract

Global integration has increased the international linkages of financial markets for emerging market countries. A key channel for the international transmission of inflation and economic cycles is from exchange rate movements to domestic prices, known as exchange rate pass-through (ERPT). This article reviews the conceptual, methodological and policy issues connected with ERPT in emerging market and developing countries, and critically surveys selected empirical studies. A key contribution is to categorise and compare the heterogeneous methodologies used to extract ERPT measures in the empirical literature. Single equation models and systems methods are contrasted; frequent misspecifications that produce unreliable ERPT estimates are highlighted. The discerning policy-maker needs to ascertain by which methods ERPT measures were calculated, the controls and restrictions applied, and the time frame and stability of the estimates.     

The Southern African customs union,cereal price policy in South Africa,and food security in Botswana

It is elaborated in this article that external factors may affect food security in developing countries even if these countries are not exposed to price instability in world food markets. This is the case in the Southern African Customs Union where the agricultural price policy in South Africa affects food security in Botswana, Lesotho and Swasiland. It is analysed quantitatively how cereal price policy in South Africa influenced the cereal import sector of Botswana in the period 1969–84. Cereal import prices increased due to Botswana's membership of the customs union, and cereal imports declined. The price increase was accompanied by a price‐stabilising impact.     

How Vulnerable are Arab Countries to Global Food Price Shocks?

Abstract

We estimate pass-through effects of international food price movements into domestic food prices for 18 countries in the Middle East and North Africa, using threshold regressions. International price movements transmit to various degrees into domestic prices. Transmission is mostly asymmetric, pushing domestic price levels up as increases in international food prices are typically passed through, but declines are rarely transmitted. This situation is indicative of policy and market distortions, notably the presence of food subsidies in the context of fiscal constraints. Hence, both international prices and their volatility matter for domestic inflation, yet domestic factors also play a role.     

Long-term Impacts of Global Food Crisis on Production Decisions: Evidence from Farm Investments in Indonesia

This paper estimates farmers’ investment response to food price spikes using household panel data collected before and after the 2007/08 food price crisis in Indonesia. We found that an increase in farmers’ terms-of-trade allowed relatively large crop-producing farmers to increase their investments at both extensive and intensive margins. Food price spikes had a significant income effect among farmers whose production surplus is large for market sales. During the food price crisis, large farmers particularly increased machine investments, which saved some labour inputs, pointing to the importance of complementarities between land and machine investments.     

Agrarian reform and seasonal employment in coastal Peruvian agriculture

This article attempts (i) to estimate intra‐year casual labour supply functions (ICLSF) for single field tasks to selected agricultural production cooperatives in Northern Peru; (ii) to explain the marked seasonal variation in wage rates paid by these cooperatives to casual workers; (iii) to evaluate the relevance of minimum wage legislation for casual labourers on these enterprises, and (iv) to assess the degree of labour market integration both within and between production cooperatives. Two types of labour supply function were identified: (a) perfectly elastic at the minimum wage, and (b) kinked ICLSF. Wage rates set in the cooperative's external labour market affect wage determination in its internal labour market. The casual labour markets in two valleys were found to be poorly integrated.     

The Effect of Food Price Changes on Child Labour: Evidence from Uganda

Most people in developing countries spend up to 60 per cent of their income on food, even though the majority of them are farmers. Hence, a change in food prices affects both their revenue as well as expenditure, and it may thereby affect their labour market decisions. Using the Uganda National Panel Survey and monthly regional food prices, this paper examines the effect of changes in food prices on child labour. The empirical evidence shows that an increase in food prices is linked to an increase in the probability and the intensity of child labour. We find the effect of food price increases to be smaller among landowning households, which is consistent with the view that landowning households can better compensate for price shocks. The empirical results suggest that periodic shocks in food prices may have longer lasting effects on economic development in developing countries through the channel of child labour.     

The Balance of Power in Rural Marketing Networks: A Case Study of Snake Trading in Cambodia

Producers in small-scale rural markets often receive unfavourable prices for their goods as a result of more powerful market participants. This study uses a combination of price analysis and interview data to assess the position of snake hunters in the aquatic snake market from Tonle Sap Lake in Cambodia. Despite the hunters' dependence on intermediary traders for market access and credit, the evidence implies that they are not powerless participants. Intermediary traders operate under high competition as a result of the increasing scarcity of snakes and therefore, despite interlocked credit and snake markets, offer relatively high prices to hunters.     

Food Price Transmission and Economic Development

In this paper we challenge the conventional wisdom that the world’s poorest countries are also the most vulnerable to spikes in international food prices. We derive an inverted U-shaped relationship between food price transmission and the development level of a country from a theoretical model. This prediction is subsequently tested in two sets of regressions where economic development is approximated by per capita income and where we control for a number of other potential determinants of food price transmission. The first set of regressions is based on estimated transmission elasticities and the second on actual domestic food price changes during spikes in international food prices. In both sets of regressions we find strong evidence of the existence of an inverted U-shaped relation between food price transmission and income. Thus, food prices in middle income (rather than in low income) countries respond the strongest to changes in international food prices, implying that the poor in these countries are the most exposed to spikes in food prices. We also show that the factors explaining the variation in the estimated transmission elasticities can explain the variation in domestic food price changes during spikes in international food prices equally well.     

Change in state power,international conditions and peasant producers: The case of Kenya

Arguments for food self‐sufficiency at the level of small‐scale farms invariably refer to the need for national self‐sufficiency. This article shows that state‐inspired attempts to impose self‐sufficiency upon specialised middle peasant producers in Kenya have had the effect of reducing the supply of marketed food and increasing food imports. A change in the character of presidential power has also inhibited food production by large‐scale farms and this, together with imported price shocks, has reduced the supply of food for commercialised peasants who produce for international markets. Only very specific political conditions make it possible for international and internal circuits of capital and exchange to be harmonised through the power of a nation state.