Abstract

Despite the potential of pigeon pea as an alternative cash crop, no adequate information on spatial market integration of the product has been documented. Motivated by wide pigeon price margins among spatially separated markets in the country this study conducted an economic analysis of the spatial integration of pigeon pea markets in Malawi. A total of seven pigeon pea markets namely; Balaka, Limbe, Luchenza, Nchalo, Ngabu, Nsanje and Zomba were analyzed. The research used average monthly pigeon pea retail prices for the period January 2005 to December 2008. By applying correlation analysis and co-integration approaches we tested for short-run and long-run spatial market integration of pigeon pea in the country. The analysis was extended to VECM and Granger Causality to estimate speed of adjustment and determine the direction of causality between the markets respectively. The results of the study indicate that all markets were integrated of order 1. Johansen co-integration test procedure indicated 5 co integration relationships suggesting existing of long-rum relationship among markets. The speed of adjustment to equilibrium of markets was moderate to low in the markets. The direction of price transmission showed both bi- directional and unidirectional transmission process and that three markets were identified as market leaders. Innovations of four markets explained the forecast error variance in other markets. These results therefore are indicative of moderate integration of the pigeon pea markets in Malawi. Two policy implications can be advanced based on the findings of the study. Considering, the complexity and unstable market conditions of pigeon pea and its potential as an alternative cash crop it is imperative to continuously study this market to understand the relationship of markets from time. This will keep policy makers updated on changes of pigeon pea markets and their associated new markets. The current study suggests possible areas for intervention to turn the market for pigeon pea towards perfect integration. Knowledge on pigeon pea market changes will achieve the goal of transforming the legume sub-sector into a vibrant enterprise. As poor transportation and communication conditions have been indicated as the major obstacles for perfect pigeon market integration, it is therefore imperative for government and the private sector to continue investing in transport and communication infrastructure such as roads and telephones. This will improve the flow of both pigeon pea grain and price information in the markets. If market participants can efficiently respond to changes in the market on time, then efficiency will be obtained in the marketing system.

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School	: School of Law, Economics and Government
Issued Date	: 2011

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