Bob Baulch is at the Institute of Development Studies, University of Sussex, UK. E-mail: b.baulch@ids.ac.uk for correspondence. Henrik Hansen is at the Institute of Food and Resource Economics, University of Copenhagen. Le Dang Trung and Tran Ngo Minh Tam are at the Centre for Analysis and Forecasting, Vietnam Academy of Social Sciences. Thanks are due to anonymous referees for their comments on an earlier draft.
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The Spatial Integration of Paddy Markets in Vietnam
Article first published online: 18 FEB 2008
DOI: 10.1111/j.1477-9552.2007.00148.x
© 2008 The Authors. Journal compilation © 2008 The Agricultural Economics Society
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How to Cite
Baulch, B., Hansen, H., Trung, L. D. and Tam, T. N. M. (2008), The Spatial Integration of Paddy Markets in Vietnam. Journal of Agricultural Economics, 59: 271–295. doi: 10.1111/j.1477-9552.2007.00148.x
Publication History
- Issue published online: 18 FEB 2008
- Article first published online: 18 FEB 2008
- (Original submitted April 2007, revision received August 2007, accepted November 2007.)
- Abstract
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Keywords:
- Paddy marketing;
- spatial market integration;
- threshold error-correction model;
- Vietnam
- Q13;
- P22;
- C22;
- N55
Abstract
This paper examines whether there is spatial integration between and within paddy markets in the north and south of Vietnam. The empirical model developed uses estimates of transfer costs to generalise Ravallion's model of spatial market integration to allow for threshold effects. A sequential testing strategy is used to test for market segmentation, the number of thresholds, long-run integration, informational efficiency and the Law of One Price within an error-correction framework. We find neither threshold effects nor weak evidence of paddy market integration between northern and southern Vietnam. There is, however, evidence of both threshold effects and stronger market integration within the Red and Mekong River deltas. Whenever price spreads exceed their thresholds, at least 60% of price changes are transmitted between regional markets within a month. Nonetheless, the instantaneous version of the Law of One Price only holds for a few regimes and market pairs. These results suggest that national level policies cannot be relied upon to stabilise or support paddy prices in Vietnam. Instead, policies need to be designed with the specific production, consumption and marketing characteristics of northern and southern Vietnam in mind.