Market integration with transaction costs in developing country staple food markets: the case of the Malawi maize market
2010
Z. Wouter
A higher degree of market integration entails smooth trade flows from surplus areas to deficit areas, less price volatility, and higher welfare. This paper investigates measurement of market integration of staple food markets in developing countries, examining the Malawi maize market as a case study. <br />The document clarifies that higher degrees of market integration are likely to stimulate a quicker response to policies and to induce more adequate reactions to shocks. This is important for Malawi maize market, considering that maize is the major stable food, and it dominates both in agricultural production and in consumption of households there. <br />The author draws these conclusions: the evidence indicates that markets are particularly well integrated during food shortages and substantially less in periods without food shortage however, this result is largely due to high transaction costs during food shortages that make trade economically unattractive market integration develops markedly different between regions and districts in this respect, the northern region shows high levels of market integration which are likely to be due to high transaction costs nevertheless, a few buyer districts are identified to have a large incidence of market failure suggesting barriers to trade <br />The paper argues that low levels of market integration observed outside periods of food shortages, and high transaction costs during food shortages, both mean that trading infrastructure in Malawi is not sufficiently developed. <br /><br />
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