Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/211088
Authors: 
Ayalew, Hailemariam
Belay, Dagim G.
Year of Publication: 
2020
Series/Report no.: 
IFRO Working Paper No. 2020/01
Abstract: 
Agricultural commodity markets in developing countries are characterized by high transaction costs and risks that reduce trade flows among spatial markets. In this article, we examine whether institutionalized agricultural commodity exchange markets reduce transaction costs and hence spatial price dispersion using the introduction of the Ethiopian Commodity Exchange (ECX) as a quasi-experiment. We use a commodity level Difference-in-Difference identification strategy to compare the spatial price dispersion of cereals that are traded at ECX (maize and wheat) with a cereal traded only at the local market (teff). Results show that ECX significantly reduces the spatial price dispersion of maize and wheat compared to teff. This effect varies depending on crop type and the time length since the ECX started trading the commodity. The longer the duration, the larger the reduction in price dispersion. We also find that dissemination of price information is the main channel through which the commodity exchange affects spatial price dispersion.
Subjects: 
Commodity Exchange
Difference-in-Difference
Ethiopia
Price Dispersion
Spatial market
JEL: 
O13
O18
Q12
Q13
Document Type: 
Working Paper

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