Spatial Integration of livestock markets in Ethiopia: sheep, goats,  cocks, bulls and oxen Fantu Nisrane Seneshaw Tamru IF...
Introduction <ul><li>The Livestock Sector is very important for incomes and diets, but the sector is still (considered) we...
The intuition behind the threshold autoregression model (TAR) <ul><li>Consider two markets, A & B.  </li></ul><ul><li>Supp...
The intuition behind the threshold autoregression model (TAR) <ul><li>This prediction breaks down with imperfect informati...
The intuition behind the threshold autoregression model (TAR) <ul><li>So we estimate two key parameters:  ρ  measures spee...
The TAR Model <ul><li>Following Van Campenhout (2007) </li></ul><ul><li>The thresholds and adjustment parameters to vary w...
Data and Context <ul><li>CSA’s Retail Price (Monthly) from September 2001- January 2011 </li></ul><ul><li>Out of over 116 ...
 
Results of market integration analysis: Sheep, Goats, and COCKS markets.
Dense Sheep population Dense Sheep population
High Sheep Per Capita
Sheep Integration with Addis Ababa Market Pairs  With out time trend Half-life  (weeks) With time trend Threshold ρ P>t ρ ...
<ul><li>Generally, sheep markets are well integrated </li></ul><ul><ul><li>Amhara, Gambella, and Harari showing better int...
<ul><li>Generally, sheep market integration is fairly good within regions, but les so in Amhara and in some market pairs i...
Dense Goat population Dense Goat population
High Goat Per Capita
<ul><li>Generally, very week goat market integration between Addis Ababa and regional markets </li></ul><ul><li>Markets in...
<ul><li>Regional integration with goat markets tends to be better, but Amhara is a big exception  </li></ul>Intra-Region I...
<ul><li>Moderate degree of Cock market integration between regional markets and Addis Ababa </li></ul><ul><li>Transaction ...
<ul><li>Generally, strong degree of intra-region integration </li></ul><ul><li>Market pairs in Dire Dawa, Harari and Tigra...
Results of market integration analysis: Bulls and oxen markets.
Dense cattle population Dense cattle population
High  cattle per capita
<ul><li>Less than a third of selected markets integrated with Addis Ababa </li></ul><ul><li>2 out of 7 in Amhara & 3 out o...
<ul><li>Most selected bull markets are strongly integrated with respective regional capitals </li></ul><ul><li>Transaction...
<ul><li>Modest (Tigray ), High (Amhara and SNNPR) to strong (Oromia and Benishangul) degree of integration with Addis Abab...
<ul><li>Integration with regional capitals high on average, but some variation within region.  </li></ul><ul><li>Transacti...
Per Capita Expenditure (Birr/Annum) Region Per Capita Expenditure (Mean) Beef & Raw Meat Mutton Goat Meat Chicken Meat Tig...
SUMMARY
Summary Livestock Integration with Addis Integration within Regions Bull Very well Integrated  Very well Integrated  Oxen ...
Summary <ul><li>Generally, transaction costs considerably declined over the beginning and end of the study period.  During...
<ul><li>THANK YOU! </li></ul>
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Spatial Integration of livestock markets in Ethiopia: sheep, goats, cocks, bulls and oxen

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Spatial Integration of livestock markets in Ethiopia: sheep, goats, cocks, bulls and oxen

  1. 1. Spatial Integration of livestock markets in Ethiopia: sheep, goats, cocks, bulls and oxen Fantu Nisrane Seneshaw Tamru IFPRI ESSP-II Taking Stock of the Economy of the Livestock Sector in Ethiopia November 4, 2011 Addis Ababa ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE
  2. 2. Introduction <ul><li>The Livestock Sector is very important for incomes and diets, but the sector is still (considered) weakly commercialized </li></ul><ul><li>One aspect of commercialization is market integration. If transaction costs are low, then traders can move livestock from surplus (low price) to deficit (high price) areas, thus eliminating regional price differences </li></ul><ul><li>Market integration is therefore an important indicator of the efficiency of markets, and of the potential benefits of market reforms and infrastructure development </li></ul><ul><li>Hence our goal is to see whether regional livestock markets are integrated with each other and with Addis Ababa </li></ul><ul><li>We use the most sophisticated method (threshold Autoregressive Model): it implicitly tries to measure transaction costs, and whether they change over time </li></ul>
  3. 3. The intuition behind the threshold autoregression model (TAR) <ul><li>Consider two markets, A & B. </li></ul><ul><li>Suppose that in Market A there is a supply shock, so availability of livestock is reduced, and prices go up </li></ul><ul><li>Suppose that in Market B supply is adequate, so that a price gap emerges between A and B </li></ul><ul><li>With perfect information, entrepreneurial traders will notice the price gap and therefore move livestock from B to A, provided that the price gap is greater than the costs of moving livestock from B to A </li></ul><ul><li>In doing so they will remove the price difference between markets A & B </li></ul>
  4. 4. The intuition behind the threshold autoregression model (TAR) <ul><li>This prediction breaks down with imperfect information, high transaction costs, lack of entrepreneurship, lack of substitutability between products (e.g. different breeds, tastes, etc), or closer integration with foreign markets </li></ul><ul><li>So the empirical approach measures price differences between market pairs, and whether these differences only disappear above a threshold (a proxy for transaction costs), and whether they disappear quickly </li></ul><ul><li>It also allows us to explore whether thresholds (transaction costs) are changing over time </li></ul><ul><li>Clearly this is important in the context of major road investments and other market developments </li></ul>
  5. 5. The intuition behind the threshold autoregression model (TAR) <ul><li>So we estimate two key parameters: ρ measures speed at which price gaps close; and we also measure thresholds </li></ul><ul><li>If ρ = -1 this indicates perfect integration (100 % deviation transferred), with gap closing instantly </li></ul><ul><li>If ρ out =0 or >0 then no integration </li></ul><ul><li>The closer ρ is to -1 the greater the integration and the faster the gap closes </li></ul><ul><li>Strong technique, although a limitation is that it hardly to say precisely why integration exists or does not </li></ul>
  6. 6. The TAR Model <ul><li>Following Van Campenhout (2007) </li></ul><ul><li>The thresholds and adjustment parameters to vary with time, t. </li></ul>
  7. 7. Data and Context <ul><li>CSA’s Retail Price (Monthly) from September 2001- January 2011 </li></ul><ul><li>Out of over 116 for bulls, sheep, goats ,and cocks, and 117 for oxen we chose some markets using three criterion </li></ul><ul><ul><li>N umber non-missing data </li></ul></ul><ul><ul><li>Unit-root tests, stationary price series dropped </li></ul></ul><ul><ul><li>Reapplication of the first criteria in regions where closely situated markets are involved. </li></ul></ul><ul><li>40 bulls and oxen, 42 sheep, 47 goats, and 49 cock markets selected, 780 market pairs, </li></ul><ul><li>Only a limited number presented and discussed, </li></ul><ul><ul><li>Integration with Addis Ababa, and </li></ul></ul><ul><ul><li>Intra-region integration including with regional capitals </li></ul></ul>
  8. 9. Results of market integration analysis: Sheep, Goats, and COCKS markets.
  9. 10. Dense Sheep population Dense Sheep population
  10. 11. High Sheep Per Capita
  11. 12. Sheep Integration with Addis Ababa Market Pairs With out time trend Half-life (weeks) With time trend Threshold ρ P>t ρ . t P>t Initial period Last Period (Nominal Thr_1 Thr_115 AA-Endaselassie -0.565 0.05 3.33 0.000 0.96 30 18 39 4 AA-Assayita -0.702 0.00 2.29 0.006 0.00 30 150 57 41 AA-Bahir Dar -1.336 0.00 - 0.012 0.00 15.0 15.0 19 4 AA-Gondar -0.848 0.00 1.47 0.006 0.03 37.5 55.0 44 14 AA-Debre_Birhan -1.011 0.00 - 0.009 0.00 20 55 24 14 AA-Debre_Markos -0.943 0.00 0.97 0.008 0.00 19 19 19 5 AA-Kobo -1.036 0.00 - 0.009 0.00 20 100 21 26 AA-Nazareth -0.362 0.01 6.17 0.002 0.37 120 45 85 8 AA-Gimbi -0.759 0.00 1.95 0.007 0.00 25 10 42 3 AA-Shashemene -0.605 0.00 2.99 0.006 0.00 30 105 46 37 AA-Jigjiga -0.688 0.01 2.38 0.006 0.03 27 70 36 16 AA-Gambella -1.256 0.00 - 0.009 0.00 10 40 11 8 AA-Hosaena -1.001 0.00 - 0.009 0.00 10 30 17 8 AA-Jinka -0.532 0.00 3.65 0.004 0.01 75 170 152 50 AA-Assosa -0.827 0.00 1.58 0.006 0.01 30 37 43 11 AA-Harar -1.054 0.00 - 0.008 0.00 13 36 13 8
  12. 13. <ul><li>Generally, sheep markets are well integrated </li></ul><ul><ul><li>Amhara, Gambella, and Harari showing better integration; </li></ul></ul><ul><ul><li>Tigray and Oromiya Regions less so </li></ul></ul><ul><li>Generally, transaction costs (as percentage of average price) declined substantially over time </li></ul>Sheep Integration of Selected Markets (with Addis Ababa) Statistics Average Level of Integration Stand. Dev. Total Pairs Considered Percent Integrated Transaction cost (September 2001)* Transaction Cost (January 2011)* All -0.85 0.27 17 94 42 16 Tigray -0.57 - 1 100 39 4 Afar -0.70 - 1 100 57 41 Amhara -1.03 0.18 5 100 25 13 Oromiya -0.58 0.20 3 100 58 16 Somali -0.69 - 1 100 36 16 Gambella -1.26 - 1 100 11 8 SNNPR -0.77 - 2 50 84 29 Benishangul -0.83 - 1 100 43 11 Harari -1.05 - 1 100 13 8 *As a percentage of Average price of the pairs considered
  13. 14. <ul><li>Generally, sheep market integration is fairly good within regions, but les so in Amhara and in some market pairs in Oromiya </li></ul><ul><li>Again, the transaction costs between the initial and last period declined significantly </li></ul>Intra-Region Integration of Selected Sheep Markets Statistics Average Level of Integration Stand. Dev. Total Pairs Considered Percent Integrated Transaction cost (September 2001)* Transaction Cost (January 2011)* All -0.77 0.40 40 55 47 14 Tigray -0.75 0.40 4 75 54 10 Afar -0.87 0.12 5 40 70 4 Amhara -0.63 0.23 9 56 23 10 Oromiya -0.73 0.74 7 57 59 21 Somali -0.61 - 1 100 74 12 Gambella -1.05 - 1 100 45 17 SNNPR -0.84 - 6 17 66 30 Benishangul -0.87 - 3 33 17 10 Harari -0.66 - 1 100 85 24 *As a percentage of Average price of the pairs considered
  14. 15. Dense Goat population Dense Goat population
  15. 16. High Goat Per Capita
  16. 17. <ul><li>Generally, very week goat market integration between Addis Ababa and regional markets </li></ul><ul><li>Markets in Afar, Somali, and SNNPR showed weaker integration with Addis; Gambella and Benishangul showing no integration </li></ul>Goat Integration of Selected Markets (with Addis Ababa) Statistics Average Level of Integration Stand. Dev. Total Pairs Considered Percent Integrated Transaction cost (September 2001)* Transaction Cost (January 2011)* All -0.39 0.15 21 52 103 21 Tigray -0.37 - 4 25 92 19 Afar -0.15 - 1 - 127 27 Amhara -0.58 0.10 4 75 125 27 Oromiya -0.47 0.17 3 - 99 21 Somali -0.23 1 - 114 14 Gambella - SNNPR -0.23 - 4 25 114 24 Benishangul - 1 - Harari -0.49 - 1 - 56 6 *As a percentage of Average price of the pairs considered
  17. 18. <ul><li>Regional integration with goat markets tends to be better, but Amhara is a big exception </li></ul>Intra-Region Integration of Selected Goat Markets Statistics Average Level of Integration Stand. Dev. Total Pairs Considered Percent Integrated Transaction cost (September 2001)* Transaction Cost (January 2011)* All -0.96 0.58 36 47 59 12 Tigray -0.76 0.45 3 100 55 15 Afar -0.47 4 25 33 8 Amhara NI** 4 0 Oromiya -0.70 0.60 6 33 60 17 Somali -1.16 2 50 33 2 Gambella -1.10 1 100 67 10 SNNPR -1.20 0.83 8 75 73 12 Benishangul -1.11 0.11 5 40 43 11 Harari -0.38   1 100 60 12 *As a percentage of Average price of the pairs considered **NI -not integrated
  18. 19. <ul><li>Moderate degree of Cock market integration between regional markets and Addis Ababa </li></ul><ul><li>Transaction costs again declined significantly </li></ul>Cock Integration of Selected Markets (with Addis Ababa) Statistics Average Level of Integration Stand. Dev. Total Pairs Considered Percent Integrated Transaction cost (Sept.01)* Transaction Cost (Jan. 11)* All -0.75 0.21 23 65 81 17 Tigray -0.94 - 1 - 52 11 Afar -0.70 - 1 - 35 2 Amhara -0.92 0.17 6 83 97 21 Oromiya -0.69 0.35 3 67 76 7 Somali -0.65 - 2 50 171 33 Gambella NI** - 2 0 SNNPR -0.61 0.07 4 75 61 14 Benishangul NI - 2 50 Harari -0.40 5.41 1 - 73 27 Dire Dawa -0.70 2.28 1 - 66 24 *As a percentage of Average price of the pairs considered **NI -not integrated
  19. 20. <ul><li>Generally, strong degree of intra-region integration </li></ul><ul><li>Market pairs in Dire Dawa, Harari and Tigray showed less integration </li></ul><ul><li>Transaction costs again declined very substantially </li></ul>Intra-Region Integration of Selected Cock Markets Statistics Average Level of Integration Stand. Dev. Total Pairs Considered Percent Integrated Transaction cost (Sept.01)* Transaction Cost (Jan. 11)* All -0.96 0.44 53 55 34 9 Tigray -0.70 0.12 5 60 13 6 Afar -0.98 0.34 5 80 38 13 Amhara -0.80 0.18 8 38 54 15 Oromiya -0.95 0.22 10 40 28 10 Somali NI 3 0 Gambella -1.34 0.27 2 100 18 6 SNNPR -1.00 0.69 14 57 39 10 Benishangul -1.08 0.49 5 80 28 3 Harari -0.65 2 50 56 2 Dire Dawa -0.65   2 50 56 2 *As a percentage of Average price of the pairs considered **NI -not integrated
  20. 21. Results of market integration analysis: Bulls and oxen markets.
  21. 22. Dense cattle population Dense cattle population
  22. 23. High cattle per capita
  23. 24. <ul><li>Less than a third of selected markets integrated with Addis Ababa </li></ul><ul><li>2 out of 7 in Amhara & 3 out of 10 in Oromia integrated with Addis Ababa </li></ul><ul><li>But for those integrated are perfectly integrated </li></ul><ul><li>No market in pastoralist Afar, Somali, & Negele is integrated with Addis A. </li></ul><ul><li>Transaction costs again declined enormously </li></ul>Bulls markets integration with Addis Ababa. Average Integration Stand. Dev. Pairs Considered Percent Integrated Transaction cost: Sep.01* Transaction Cost: Jan. 11* All pairs -1.55 0.5 39 31 140 33 Tigray -1.06 0.2 3 67 57 18 Amhara -1.37 0.0 7 14 131 39 Oromia -1.4 0.5 10 30 154 27 Ben-Gum -1.74 0.5 6 33 120 32 SNNP -1.84 0.7 10 40 184 36 *As a percentage of Average price of the pairs considered
  24. 25. <ul><li>Most selected bull markets are strongly integrated with respective regional capitals </li></ul><ul><li>Transaction costs again declined </li></ul>Intra-Region bulls markets integration Statistics Average Integration Stand. Dev. Total Pairs Considered Percent Integrated Transaction cost: ep.01* Transaction cost: Jan. 11* All pairs -1.36 0.7 29 52 94 15 Tigray -1.66 0.0 2 50 57 38 Amhara -1.52 0.8 6 67 48 7 Oromia -0.96 0.2 9 33 132 10 Ben-Gum -0.86 0.0 4 75 27 10 SNNP -2.54 0.8 6 33 270 34 *As a percentage of Average price of the pairs considered
  25. 26. <ul><li>Modest (Tigray ), High (Amhara and SNNPR) to strong (Oromia and Benishangul) degree of integration with Addis Ababa </li></ul><ul><li>Transaction costs (as %age of average price) declined between the beginning and end </li></ul>Integration of regional oxen markets with Addis Ababa. Statistics Average Level of Integration Stand. Dev. Total Pairs Considered Percent Integrated Transaction cost (Sept.01)* Transaction Cost (Jan. 11)* All pairs -0.77 0.7 39 51 73 19 Tigray -0.61 0.2 3 67 22 16 Amhara -0.82 0.0 7 29 57 11 Oromia -0.93 0.9 10 60 57 23 Benish. G -1.02 0.4 6 50 68 18 SNNP -0.85 0.3 10 50 112 19 *As a percentage of Average price of the pairs considered
  26. 27. <ul><li>Integration with regional capitals high on average, but some variation within region. </li></ul><ul><li>Transaction costs again declining </li></ul>Summary statistics of oxen markets integrated with regional capitals. Statistics Average Integration Stand. Dev. Total Pairs Considered Percent Integrated Transaction cost: Sep.01* Transaction Cost : Jan. 11* All pairs -1.01 0.4 29 66 53 16 Tigray -1.03 0.0 2 50 15 13 Amhara -1.14 0.5 6 83 52 19 Oromia -0.92 0.2 9 22 34 5 Ben-Gum -0.93 0.3 4 75 24 8 SNNP -1.01 0.6 6 100 81 16 *As a percentage of Average price of the pairs considered
  27. 28. Per Capita Expenditure (Birr/Annum) Region Per Capita Expenditure (Mean) Beef & Raw Meat Mutton Goat Meat Chicken Meat Tigray 50 88 61 30 Afar 48 61 102 18 Amhara 42 104 93 24 oromiya 59 51 72 26 Somale 87 28 66 28 Benishangul-gumuz 63 33 66 29 SNNPR 60 50 84 27 Harari 85 28 77 33 Addis Ababa 87 107 96 22 Dire Dawa 69 34 45 25 Source: Based on CSA's HICES
  28. 29. SUMMARY
  29. 30. Summary Livestock Integration with Addis Integration within Regions Bull Very well Integrated Very well Integrated Oxen Moderate to High level of integration Very well Integrated Sheep Generally, very well integrated except markets in Tigray and Oromiya regions that showed moderate level Generally, modest integration Goats Generally, very weak integration; Gambella and Benishangul showing No integration -Transaction costs are fairly high Very good integration except Afar (weak) and Amhara (no integration) Cocks Moderate degree of Integration Strong degree of integration except in Tigray, and Harari that showed fair degree integration
  30. 31. Summary <ul><li>Generally, transaction costs considerably declined over the beginning and end of the study period. During 2011 estimated transaction costs were about one quarter the level they were in 2001 in nearly all cases. </li></ul><ul><li>These are very positive results suggesting increased commercialization and trade, but our study has not yet pinned down why </li></ul><ul><li>We suspect major improvements in road infrastructure and telecommunications (which benefits traders greatly). </li></ul><ul><li>Conversely, lack of integration could be explained by pickets of poor infrastructure, integration with neighboring countries, or consumer livestock preferences </li></ul>
  31. 32. <ul><li>THANK YOU! </li></ul>

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