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Spatial Integration of Livestock Markets in Ethiopia

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A Multidimensional Economic Assessment of Africa

Part of the book series: Frontiers in African Business Research ((FABR))

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Abstract

Integration of livestock markets is important for stabilizing livestock prices, allocating resources, and alleviating market imperfections to improve market efficiency. It has been shown that market integration has a considerable effect on the successful design of agricultural price stabilization policies and in improving food security and the welfare of producers and consumers particularly in highly diverse and vulnerable countries like Ethiopia. Using a time varying threshold autoregressive model, this study contributes to literature by studying the spatial livestock market integration in Ethiopia. The results show that although there is a statistically significant improvement in market integration over the studied time period (2001–2018), regional livestock markets in Ethiopia are not fully integrated with the central market (Addis Ababa). This affects (based on economic theory), improvements by producers, consumers, and traders’ welfare which can be improved by investments. However, the study also finds that the transaction costs for all livestock types reduced over the study period, but the deviation from the equilibrium was still far from short. Policy options that aim to reduce bottlenecks in livestock market integration like policies that lead to a reduction in transaction costs, should be implemented to improve integration in the livestock market.

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Notes

  1. 1.

    Transaction costs often include expenditure on fuel, time, and effort to coordinate shipments and pick-up of transported commodities and synchronization between the buyers and sellers.

  2. 2.

    Since it is essentially bivariate by its construction it does not consider a case for trade flow from one market to another market via a third market. In addition, the transaction costs in this method are estimated as a linear function of time.

  3. 3.

    Most of the districts have missing observations due to animals from a category not being presented for sale or because the enumerators failed to collect animal prices for that type of livestock during that month.

  4. 4.

    The individual price series (regional market prices) are integrated of order one, I (1). But the difference between prices at two locations (the margin) is stationary, so we estimated a modified TAR model on the margin.

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Author information

Authors and Affiliations

  1. Department of Economics, Addis Ababa University, Addis Ababa, Ethiopia

    Gutu Gutema

  2. Jonkoping International Business School, JIBS, Jönköping, Sweden

    Gutu Gutema

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  1. Gutu Gutema
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Correspondence to Gutu Gutema .

Editor information

Editors and Affiliations

  1. JCU Singapore Business School, James Cook University, Singapore, Singapore

    Jacob Wood

  2. College of Business and Economics, University of Rwanda, Kigali, Rwanda

    Olivier Habimana

Appendix

Appendix

See Table 3.A1.

Table 3.A1 Summary of price adjustment, Threshold and Half-life for the all livestock types (July 2001 to June 2018)
Full size table

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Gutema, G. (2020). Spatial Integration of Livestock Markets in Ethiopia. In: Wood, J., Habimana, O. (eds) A Multidimensional Economic Assessment of Africa. Frontiers in African Business Research. Springer, Singapore. https://doi.org/10.1007/978-981-15-4510-8_3

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