An econometric analysis of spatial market integration and price formation in the Namibian sheep industry

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Date
2017-12
Authors
Ijambo, Bertha Deshimona
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Publisher
African Economic Research Consortium
Abstract
The Namibian government introduced the Small Stock Marketing Scheme (SSMS) for the sheep market in 2004. The SSMS is a quantitative export restriction. Quantitative export restriction policies decrease the tradable quantity of a commodity, and increases domestic supply of a commodity, causing a lack of equilibrium in spatial markets. This, therefore, has the capacity to hinder market integration. Moreover, a quantitative export restriction disrupts the domestic supply and demand, and ultimately the equilibrium prices. A policy such as the quantitative export restriction therefore determines the domestic price levels. The effect of the SSMS on spatial market integration and price formation remains unclear. A lack of empirical evidence on spatial sheep market integration and domestic price levels can create challenges for policy makers. This is because a lack of evidence could prevent policy makers from implementing evidence-based policies, which might buffer poor consumers and producers from adverse price shocks, and lead to improved resource allocation.
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Keywords
Market integration, price formation, government intervention, quantitative export restrictions, Namibia’s sheep market
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