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The Ethiopian Commodity Exchange and spatial price dispersion
Luleå University of Technology, Department of Business Administration, Technology and Social Sciences, Social Sciences.
Environment and Climate Research center at the Ethiopian Development Research Institute, Addis Ababa.
School of Business and Economics, UiT the Arctic University of Norway.
Number of Authors: 3
2017 (English)In: Food Policy, ISSN 0306-9192, E-ISSN 1873-5657, Vol. 66, 1-11 p.Article in journal (Refereed) Published
Abstract [en]

In this article, we study the impact of an institutional intervention on market efficiency in Ethiopia. More specifically, we analyze to what extent the Ethiopian Commodity Exchange (ECX) in combination with regional warehouses have contributed to a reduction in price spreads between regional markets. Our hypothesis is that warehouses connected to the ECX reduce the dispersion between export prices and local retail prices in different coffee growing areas, as well as the dispersion between export prices and local retail prices in different coffee growing areas. By doing so, the ECX has the potential to improve the market efficiency. To identify the causal effect, we combine retail price data with information on the gradual rollout of warehouses connected to the ECX from 2007 to 2012. Our results suggest that, when two markets both have access to an operating warehouse, the average price spread is 0.86–1.78 ETB lower than it is for markets where at least one part lacks warehouse access. This is a substantial reduction considering that the average price spread over the full period is 3.33 ETB. The main results are robust to various econometric specifications, and our analysis thus suggests that local warehouses connected to the ECX have indeed improved market efficiency

Place, publisher, year, edition, pages
Elsevier, 2017. Vol. 66, 1-11 p.
Keyword [en]
Coffee, Commodity exchanges, Ethiopia, Price dispersion, Warehouses
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:ltu:diva-60653DOI: 10.1016/j.foodpol.2016.11.003OAI: oai:DiVA.org:ltu-60653DiVA: diva2:1049252
Projects
Jordbruk i afrikanska länder - information och marknadsmakt
Note

Validerad; 2016; Nivå 2; 2016-11-29 (andbra)

Available from: 2016-11-24 Created: 2016-11-24 Last updated: 2016-12-03Bibliographically approved

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Publisher's full texthttp://dx.doi.org/10.1016/j.foodpol.2016.11.003

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