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Missed opportunities and missing markets: Spatio-temporal arbitrage of rice in Madagascar. Christine Moser, Chris Barrett and Bart Minten May 18, 2005 World Bank seminar. Motivation. Markets are crucial for -transmitting macro/sectoral policy signals to micro-level agents
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Christine Moser, Chris Barrett and Bart Minten May 18, 2005
World Bank seminar
Markets are crucial for
-transmitting macro/sectoral policy signals to micro-level agents
- maintaining incentives in the face of technological change
- managing locally covariate risk
Yet we know surprisingly little about:
- how markets function
- the correlates of markets which are competitive, non-competitive, or segmented
- scales at which policy interventions ought to occur
This paper addresses these gaps using data from Madagascar.
Where r is rice price, p is paddy price, τ is spatial marketing margin, π is storage and interest costs, and α is milling costs.
Baulch (1997 AJAE) and Barrett and Li (2002 AJAE) develop appropriate mixture distribution-based ML methods – parity bounds model (PBM) – for estimating the probability that markets are in one or another regime.
Regime 1: Competitive eqln
Regime 2: Segmented eqln
PBM (Parity Bounds Model)
Price Difference (absolute)
Quarter 1 Quarter 2 Quarter 3 Quarter 4
Regime 1: laissez faire, perhaps work to reduce marketing margins
Policy interventions most appropriate under:
Regime 2: marketing margins a binding constraint on market-based transmission of policy signals, diffusion of local risk, incentives to adopt improved technologies.
Regime 3: market competition a constraint on market-based transmission of policy signals, diffusion of local risk, incentives to adopt improved technologies.
Other major cities
Three scales of spatial market integration
Rice price/kg in FMG
Table 4: Spatial PBM Estimation Results
(between the second and third quarters)
Table 7: Intertemporal PBM estimation results
Interseasonal flow reversals
LL value = -3576.85