Spatial Price Transmission and Market Integration between Fresh Tomato Markets in Ghana: Any Benefits from Trade Liberalisation?

While much of the trade liberalisation literature analyses liberalisation effects on trade volumes, we postulate the implications of trade liberalisation for price transmission and market integration between tomato producer and consumer markets under a high and a reduced period of agricultural, import tariffs in Ghana. Our objective is to determine whether price transmission and thus the factors responsible for market integration sufficiently improved across the two periods. Using the threshold autoregressive (TAR) model to estimate wholesale price series from four major fresh tomato markets in Ghana, we discover a mixed pattern of price transmission between market pairs. Whereas the transmission of price changes between markets improved for some market pairs, it deteriorated for others from the high to the low tariffs period. Averagely however, estimated speeds of price adjustment, which measure the level of price transmission, and thresholds that proxy transaction costs, demonstrate an improvement in the integration of the markets after import tariffs were lowered. Therefore, contrary to public onion and anecdotal evidence, the degree of market integration has not deteriorated following trade liberalisation in Ghana. Liberalisation obviously reduced the market share of Ghana’s fresh tomato, but there is no compelling evidence to suggest that trade liberalisation is responsible for the perennial marketing problems of Ghana’s fresh tomato. The role of other underlying factors needs to be examined in explaining the observed signals of market failure and in considering options for reducing the price volatility in and improving the market competitiveness for fresh tomato in Ghana.