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Estimating the Degree of Market Integration
Author(s) -
Fackler Paul L.,
Tastan Hüseyin
Publication year - 2008
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/j.1467-8276.2007.01058.x
Subject(s) - econometrics , market integration , inference , economics , statistical inference , econometric model , function (biology) , indirect inference , market price , computer science , statistics , mathematics , microeconomics , artificial intelligence , evolutionary biology , estimator , biology
Existing tests of spatial market integration are commonly based on statistical criteria without an explicit link to an economic model of price determination. This article proposes new measures of market integration defined directly in terms of a well‐known spatial price determination model and develops an econometric methodology for estimating these measures. Due to the intractability of the conditional density function of prices, we use indirect inference to estimate the model parameters and market integration measures. The methodology is illustrated with simulated data and is applied to soybean price data for the United States, Brazil, and the EU.