Market integration and pricing efficiency, empirical analyses to the agribusiness sector

Abstract

Markets are organizations created to facilitate exchange. This is possible because a market comprises a set of institutions developed primarily to reduce a particular type of transaction costs: the market transaction costs. Those costs are important not assess market efficiency, but also to understand how and in which circumstances two or more markets are interconnected. They are the key-variable to understand efficiency in economic organizations. Transaction costs literature has been widely applied in many different research fields, such as development, finance, agricultural economics and natural resource economics, among others. Despite this recognition, measuring transaction costs is still a challenging task. As Allen (2006) states, if transaction costs could be measured with reasonable accuracy, the theory would become more valuable. More integrated markets are associated with a higher degree of relationship-specific assets, prices or more frequent exchange. Among the empirical methods applied, Richman and Macher (2006) indicate thre main strategies to analyze transaction cost, namely: (i) the qualitative case studies, (ii) quantitative single industry studies, and (iii) econometric analyses. In the econometric analyses, two methods were preferred: (a) time series analysis ; and (b) panel data estimation. The advantage of the first method is the possibility of correcting the selection bias associated with estimating the effect of organizational mode on performance (Masten, 1993). The panel data models are useful because they offer many procedures to control unobservable components