Written Paper

Government intervention and market integration in prominent wheat markets of Pakistan  [2007]

Mushtaq, K. (University of Agriculture, Faisalabad (Pakistan). Dept. of Agricultural Economics) Abbas, F. (Bonn Univ. (Germany). Centre for Development Research) Abedullah (University of Agriculture, Faisalabad (Pakistan). Dept. of Environmental and Resource Economics)

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Regional market integration in many agricultural commodities has been extensively studied for the insight it provides into the functioning of such markets; such studies provide valuable information about the dynamics of market adjustments, and whether there exist market imperfections, which may justify government intervention. In the case of widely spatially dispersed regional food markets in developing countries, the nature and extent of market integration is of particular importance. Periodic localized supply shortages are common and have the potential to create major food security problems. Further, various market imperfections, such as entrenched monopolies/ monopsonies and inadequate and costly information transmission, hinder the attainment of market efficiency, and may constrain sustainable agricultural development and aggravate inequitable pattern of income distribution. This study empirically estimated the degree of integration in whe at markets using the law of one price (LOP) framework and cointegration analysis. Results show that wheat markets are perfectly integrated and Lahore is the dominating market. This high degree of market integration provides little justification for extensive and costly government intervention designed to improve the market efficiency.

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Pakistan Journal of Agricultural Sciences (Pakistan)

ISSN : 0552-9034