Testing Perfect Spatial Market Integration: An Application to Regional U.S. Cattle Markets

In: Applied Economic Perspectives and Policy, Band 12, Heft 2, S. 173-186

Abstract

AbstractA rational expectations model is used to test spatial integration in regional slaughter steer markets. Market integration is examined using the concept of the law of one price across spatially separated markets. The approach and methodology used in this study overcomes three problems associated with standard approaches to testing market integration: simultaneity biases, an ignorance or misrepresentation of serial correlation, and a neglect of price expectations. Results indicate limited integration and suggest a shift in spatial price linkages between regional cattle markets between 1980 and 1987.