EFFECT OF TRANSACTION COST ON MARKET INTEGRATION OF COWPEA BETWEEN KANO AND ABIA, IMO AND ENUGU STATES, NIGERIA

Abstract

The study analyzed the effect transaction cost has on market integration. The study used secondary data of cowpea monthly price obtained from National Bureau of Statistic (NBS) (2016-2018). It looked at the effect of transaction cost on market integration in the study area. It used Threshold Autoregressive error correction model (TAR) to realize the objective. It was ascertained that transaction cost had effect on market integration. The effect of transaction cost was determined by the market asymmetry of prices between the source and destination market prices of cowpea; with the threshold value of 0.929, 1.011 and 1.327 respectively for Abia, Imo and Enugu States. The result indicated evidence of nonlinearity in the error correction and long-run asymmetry (asymmetry in the speed of adjustment) and a well distribution of observation in the `IN` regime: variation of values smaller than the threshold θ, that is, it is inside threshold interval, 38.5, 38.5 and 46.2%) as well as the OUT regime: deviation of values outside the threshold, 61.5, 61.5and 53.8 %). The study therefore, recommended that policies that improve infrastructural development (good road network) should be encouraged to reduce effect of transaction cost on market integration.