Files
Abstract
Cross-border trade in food commodities within sub-regional economic blocks in Sub-Sahara
Africa (SSA) is believed to be faster, cheaper, more convenient and welfare-enhancing than
overseas trade between SSA countries and the USA, EU and the BRIC countries. The
difficulty of commodity arbitrage across international borders SSA is however a fundamental
constraint to price transmission, market integration and the realisation of the welfare-enhancing
role of cross-border trade in Africa. This study examines the impact of border and
distance on price transmission between tomato markets in Ghana and Burkina-Faso. The
analysis applies a regime-switching vector error correction model to estimate semi-weekly,
wholesale prices of tomato in four tomato markets in Ghana and a production centre in
Burkina-Faso. Estimated parameters of price transmission contain evidence of border and
distance effects. This is expected since high transfer costs, including cross-border tariffs are
incurred by traders in moving tomato across the border. Moreover, the perishable nature of
tomato, and the poor quality of roads and transportation facilities may imply additional costs
of risks to arbitrageurs. The findings have both theoretical relevance and practical
implications for facilitating cross-border trade in West Africa, especially for trade between
landlocked countries like Burkina-Faso and coastal ones like Ghana.