Economic analysis of spatial integration of pulses market. A case of selected pulse markets in Ethiopia

Abstract

Small import-dependent countries in the world, especially in Africa, are deeply affected by the food insecurity and economic crises. To solve this problem, the Government of Ethiopia has adopted a different strategy in agricultural sector by focusing on how to increase the volume of production. However, marketing aspect has been given less attention. In order to improve the market efficiency, significant numbers of empirical studies have been conducted on market integration but they focused mainly on cereal market while pulse market has not been given adequate attention. This study was conducted to investigate the market integration level of pulse market in Ethiopia. The study selected two major pulse group in the country (Horse beans and Chickpeas) based on their volume of production. Average monthly prices (Birr/100 Kg) from January 2003 to December 2013 were obtained from Ethiopian Grain Trade Enterprise (EGTE). The analysis was done using Co-integration model, Error Correction model and Granger Causality model. STATA 11 analysis software was used to process the data. Co integration test results indicate that, all the selected markets are co-integrated at 1% significant level. However, Addis Ababa- Desse for the case of Horse beans and Addis Ababa-Gonder for Chickpeas markets have strong integration and takes 43% and 40% period to adjust towards the long run equilibrium respectively. Looking at the causal relationship, Addis Ababa-Desse, Addis Ababa-Adama, Desse-Diredawa markets are unidirectional while Desse-Adama is bidirectional for Horse beans. For Chickpeas, all the selected markets do not Granger Cause each other in both directions except between Diredawa-Adama which were unidirectional. The finding of the study implies that, any agricultural marketing policy should realise the nature of the markets and need to consider their relationship. The results suggest that geographical difference, distance and volume of production are important factors affecting spatial market integration. The study recommends government intervention in developing infrastructure, improving access to information and strengthening legal enforcement rules especially at the border of the country can reduce the trade barriers existing between markets. A modern way of trading, such as letting commodities to be traded in Ethiopia Commodity Exchange to assure market players the security they need and increase the benefits of all market actors who participate in pulse market so that the level of market integration can improve.