Spatial integration analysis of regional urea fertilizer markets in the Philippines

Issue Date

2017

Abstract

Fertilizer, an important production input, accounts for a significant share of the total production cost of some crops. Data on fertilizer’s retail price show that the price levels considerably vary across regions. Given the archipelagic nature of the Philippines, one possible cause of such disparity is the poor condition of the domestic transport infrastructure. Huge price differences could also be due to the presence of market power in the fertilizer industry. However, no study has yet analyzed the spatial market integration of the fertilizer market at the subnational level. To help determine whether or not the variability across regional domestic markets could be attributed to inefficiencies due to market segmentation, this study conducted conventional tests of spatial market integration. Those tests were implemented using two different approaches—pairwise and simultaneous. Under the pairwise approach, each region was paired with another region. All possible pairs were included in the analysis. Under the simultaneous approach, cointegration test was applied to previously identified as “anomalous” regions (i.e., regions whose fertilizer prices were greater than the national average) vis-a-vis other regions in their corresponding island groups. Results of both pairwise and simultaneous cointegration tests suggested the rejection of the null hypothesis of no cointegration. The absence of segmentation and the sheer number of players lessened the likelihood of localized monopolies as being the source of regional price disparities.

Source or Periodical Title

Philippine Journal of Development

Volume

44

Issue

1

Page

1-3

Document Type

Article

College

College of Development Communication (CDC)

Physical Description

illustrations; tables

Language

English

Subject

Fertilizers; Market inclusion, Sustainable agriculture; Fertilizer industry

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