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Effect of Transaction Costs on Market Integration of Cowpea between Gombe and Abia, Imo and Enugu State, Nigeria

E. I. Offor


In recent times studies on market integration have been able to prove the performance of the marketing system; indicating its efficiency or its inefficiency. But in most cases, the role transaction cost plays in the integration of the market is always ignored, focusing on the degree of integration only. In order to bring to mind the effect of transaction cost on the level of integration of the market, the study analyzed the effect of transaction cost on market integration. It made use of secondary data on cowpea monthly prices obtained from the National Bureau of Statistics (NBS) (2016-2018). It aimed at looking at the effect of transaction cost on market integration in the study area. It used the Threshold Autoregressive error correction model (TAR) to realize the objective. It ascertained that transaction cost has an effect on market integration. This effect was proven by the market asymmetry of prices between the source and destination market prices of cowpea; with the threshold value of 0.983, 0.861 and 1.087 respective for Abia, Imo and Enugu States. There was evidence of nonlinearity in the error correction and long-run asymmetry (asymmetry in the speed of adjustment) and well distribution of observation in the `IN` regime (30.8, 42.3 and 38.5 percent) respectively and the OUT regime (69.2, 57.7 and 61.5 percent) respectively for Abia, Imo and Enugu State. Therefore, the transaction cost is responsible for the price asymmetry. The study, therefore, recommends that policies that improve infrastructural development, communication hub and facilities should be encouraged to reduce the effect of transaction costs on market integration.