The Spatial Integration of Livestock Markets in Niger

Livestock makes an important contribution to the livelihood of Sahelian farmers and herders and is a source of self-insurance against income shocks. By allocating livestock efficiently over space, spatial market integration should foster a sustainable use of pasture resources. It is also expected to favor the sharing of risk across regions by smoothing idiosyncratic price variations. Using monthly livestock price data from Niger, we show that livestock markets are poorly integrated. Prices are seldom co-integrated, short-term integration is largely absent and there is evidence of market segmentation. Large price differentials occasionally persist between adjacent areas for long periods of time. A parity bounds approach indicates that one has to assume high transportation costs and quality variations to reconcile the data with efficient spatial arbitrage. These results confirm descriptive studies that have emphasized regional segmentation in West African