Market Integration in Wholesale Rice Markets in India

This paper tests for market integration in 55 wholesale rice markets in
India using monthly data over the period January 1970 – December 1999.
The technique of Gonzalez-Rivera and Helfand (2001) is used to identify
common factors across various markets. It is discovered that market
integration is far from complete in India and a major reason for this is the
excessive interference in rice markets by government agencies. As a result
it is hard for scarcity conditions in isolated markets to be picked up by
markets with abundance in supply. A number of policy implications are
also considered.