Effects Of Market Integration Research Articles

Agents' beliefs and economic regimes polarization in interacting markets.

In the present paper, a model of a market consisting of real and financial interacting sectors is studied. Agents populating the stock market are assumed to be not able to observe the true underlying fundamental, and their beliefs are biased by either optimism or pessimism. Depending on the relevance they give to beliefs, they select the best performing strategy in an evolutionary perspective. The real side of the economy is described within a multiplier-accelerator framework with a nonlinear, bounded investment function. We study the effect of market integration, in particular, of the financialization of the real market. We show that strongly polarized beliefs in an evolutionary framework can introduce multiplicity of steady states, which, consisting in enhanced or depressed levels of income, reflect and reproduce the optimistic or pessimistic nature of the agents' beliefs. The polarization of these steady states, which coexist with an unbiased steady state, positively depends on that of the beliefs and on their relevance. Moreover, with a mixture of analytical and numerical tools, we show that such static characterization is inherited also at the dynamical level, with possibly complex attractors that are characterized by endogenously fluctuating pessimistic and optimistic prices and levels of national income, with the effect of having several coexisting business cycles. This framework, when stochastic perturbations are included, is able to account for stylized facts commonly observed in real financial markets, such as fat tails and excess volatility in the returns distributions, as well as bubbles and crashes for stock prices.

Asset Prices in Segmented and Integrated Markets

This paper evaluates the effect of market integration on prices and welfare, in a model where two Lucas trees grow in separate regions with similar investors. We find equilibrium asset price dynamics and welfare both in segmentation, when each region holds its own asset and consumes its dividend, and in integration, when both regions trade both assets and consume both dividends. Integration always increases welfare. Asset prices may increase or decrease, depending on the time of integration, but decrease on average. Correlation in assets' returns is zero or negative before integration, but significantly positive afterwards, explaining some effects commonly associated with financialization.

WITHDRAWN: S&P 500 Index evisions and credit spreads

AbstractWe investigate the impact of S&P 500 Index revisions on credit spreads from 2001 to 2014. Additions have a significant negative impact on credit default swap (CDS) spreads both during the financial crisis period and for speculative grade firms, but deletions show no significant CDS spread changes. After excluding the effect of market integration between the stock and CDS markets, we find that S&P 500 Index inclusion conveys no unique information beyond that due to market integration except during the financial crisis. Furthermore, CDS trading liquidity does not improve after S&P 500 Index inclusion.

On Market Integration and Product R&D: A Monopoly Case

ABSTRACTApplying a monopoly model with endogenous quality choice to the case of multiple national markets, we consider the effect of market integration on product R&D incentives (i.e., quality-improving), profit, and consumer surplus. We demonstrate that the effect of market integration depends on the difference in income distributions between two countries and the level of trade cost. In particular, if the difference in income distributions between two countries is large (small) and/or trade cost is low (high), market integration can decrease (increase) the level of product quality and social welfare in the two countries.

Mending the hole in multilevel implementation: Administrative cooperation related to worker mobility

European economic integration creates unintended consequences for national public administrations. This article offers a conceptual and empirical analysis of how these challenges are met. First, three challenges are identified: a reduced capacity to offer services to citizens who move freely, increasing administrative burdens, and negative externalities for all parts from a single states’ administrative failure. Second, a conceptual framework is developed that links each challenge to a most likely response in form of modes of administrative cooperation. Third, the framework is illustrated by an empirical analysis of the coordination of social security systems, labor inspectorates, and posted workers. The case studies show that horizontal administrative cooperation is developed stepwise over time and in line with the theoretical framework. In sum, we can sustain that horizontal administrative cooperation is a relevant additional integration dynamic that buffers unintended effects of market integration on formally independent but increasingly interdependent member state executive bodies.

Regional variation in Ascaris lumbricoides and Trichuris trichiura infections by age cohort and sex: effects of market integration among the indigenous Shuar of Amazonian Ecuador.

BackgroundSoil-transmitted helminth (STH) infection peaks during childhood and varies by sex. The impact of market integration (MI) (increasing production for and consumption from a market-based economy) on these infection patterns, however, is unclear. In this study, STH infection is examined by sex and age among indigenous Shuar inhabiting two regions of Amazonian Ecuador: (1) the modestly market-integrated Upano Valley (UV) and (2) the more traditional Cross-Cutucú (CC) region.MethodsKato-Katz fecal smears were examined for parasite presence and infection intensity. Factorial ANOVAs and post hoc simple effects analyses were performed by sex to compare infection intensity between regions and age categories (infant/child, juvenile/adolescent, adult).ResultsSignificant age and regional differences in Ascaris lumbricoides and Trichuris trichiura infection were detected. Overall, infants/children and juveniles/adolescents displayed higher parasite loads than adults. CC females exhibited higher A. lumbricoides loads than UV females, while the opposite pattern was observed for T. trichiura infection in males.ConclusionsRegional infection patterns varied by sex and parasite species, perhaps due to MI-linked environmental and lifestyle changes. These results have public health implications for the identification of individuals at risk for infection and contribute to ongoing efforts to track changes and alleviate STH infection in indigenous populations undergoing MI.

Testing for Market Integration in the Australian National Electricity Market

The National Electricity Market was established in 1998 as a response to the overall liberalization and restructuring of the Australian electricity sector. The wholesale market integration effects of this establishment, however, remain to be systematically examined. We use econometric techniques based on pairwise unit root tests, cointegration analysis and a time varying coefficient model to study the extent of market integration in the physically interconnected regional markets based on daily electricity spot prices. The results from the pairwise unit root tests provide mixed evidence of price convergence while cointegration analysis does not reject the absence of persistent price differences across the physically interconnected regions. The results from the time-varying filtered coefficient model suggest that full market integration has not been achieved yet. We empirically show the presence of significant network losses and constraints across the interregional interconnectors in the NEM. Our findings suggest that convergence in generation and network ownership, coupled with harmonisation of network regulation and regulatory institutional framework, will be increasingly important factors in improving wholesale market integration across all energy-only markets as they experience an increase in the share of renewable energy.

Heterogeneous effects of market integration on sub-adult body size and nutritional status among the Shuar of Amazonian Ecuador

Background: Market integration (MI)—increasing production for and consumption from a market-based economy—is drastically altering traditional ways of life and environmental conditions among indigenous Amazonian peoples. The effects of MI on the biology and health of Amazonian children and adolescents, however, remain unclear.Aim: This study examines the impact of MI on sub-adult body size and nutritional status at the population, regional and household levels among the Shuar of Amazonian Ecuador.Subjects and methods: Anthropometric data were collected between 2005–2014 from 2164 Shuar (aged 2–19 years) living in two geographic regions differing in general degree of MI. High-resolution household economic, lifestyle and dietary data were collected from a sub-sample of 631 participants. Analyses were performed to investigate relationships between body size and year of data collection, region and specific aspects of household MI.Results: Results from temporal and regional analyses suggest that MI has a significant and overall positive impact on Shuar body size and nutritional status. However, household-level results exhibit nuanced and heterogeneous specific effects of MI underlying these overarching relationships.Conclusion: This study provides novel insight into the complex socio-ecological pathways linking MI, physical growth and health among the Shuar and other indigenous Amazonian populations.

Using social–ecological syndromes to understand impacts of international seafood trade on small-scale fisheries

Globalization has increased the speed and flow of people, information, and commodities across space, integrating markets and increasing interdependence of geographically dispersed places worldwide. Places historically driven by largely local forces and market demands are now increasingly affected by drivers at multiple scales. Trade is particularly important in driving these changes and more fish is now exported to international markets than ever before. When small-scale fisheries are integrated into global markets, local social–ecological systems change with potentially both positive and negative impacts on livelihoods, economics and ecology, but few studies systematically investigate how and why the outcomes of market integration vary from case to case.This paper systematically assesses multiple (social, ecological, economic and institutional) local effects of market integration in cases around the world by drawing on the global environmental change syndromes approach. Furthermore, we examine the factors contributing to the syndromes observed. Our analysis identifies three distinct social–ecological syndromes associated with international seafood trade. Results suggest that the presence of strong and well-enforced institutions is the principal factor behind the syndrome characterized by sustained fish stocks, while a combination of weak institutions, patron–client relationships, high demand from China and highly vulnerable target species explain the other two syndromes distinguished by declining stocks, conflict and debt among fishers.A key finding is that the factors emerging as important for explaining the different syndromes derive from different scales (e.g. local market structures vs distant market characteristics), indicating a need for multi-level governance approaches to deal with the effects of market integration. Furthermore, the meta-analysis shows that each syndrome encompasses fisheries from multiple continents. This suggests that the increasingly global nature of the seafood trade appears to be driving local dynamics by creating similar conditions for vulnerabilities in localities around the world, lending support to the notion of tele-connectivity across geographic space.

Responding to Voters or Responding to Markets? Political Parties and Public Opinion in an Era of Globalization

Conventional wisdom has it that political parties have incentives to respond to public opinion. It is also conventional wisdom that in open economies, policymakers must also “respond” to markets. Research on representation has provided ample evidence in support of the first claim. Research on the political economy of globalization has not, however, provided evidence for the second. This article examines the effects of globalization on how parties respond to voters. We argue that while elections motivate parties to respond to public sentiment, economic interdependence distracts political elites from their electorates and toward market actors, reducing party responsiveness to the mean voter. Evidence from a pair of distinct data sources spanning elections in twenty advanced capitalist democracies from the 1970s to 2010 shows that while parties have incentives to respond to left-right shifts in the mean voter position, they only do so when the national economy is sufficiently sheltered from the world economy. These findings have implications for party strategies, for representation, and for the broader effects of market integration.

A dark side of international capital market integration: Domestic investors' view

We explore the impact of capital market integration on the welfare of domestic investors, in particular, with closed-form solutions to optimal asset holdings and utility changes in a simple equilibrium framework wherein agents have mean–variance utility. Our model allows us to show the welfare loss of domestic investors with inefficient portfolios from market integration. The results indicate that only efficient portfolio holdings before integration can guarantee the welfare enhancement of all domestic investors, in contrast to the extant literature, which emphasizes the beneficial effects of market integration. In addition, we decompose the welfare changes of domestic investors into two components, i.e., the correlation effect and the quantity–volatility effect, to enhance our understanding of economic implications.

Does integration and economic policy coordination promote business cycle synchronization in the EU?

Previous studies have discounted important factors and indirect channels that might contribute to business cycle synchronization (BCS) in the EU. We estimate the effects of market integration and economic policy coordination on bilateral business cycle correlations over the period 1995–2012 using a simultaneous equations model that takes into accounts both the endogenous relationships and unveils direct and indirect effects. The results suggest that (1) trade and FDI have a pronounced positive effect on BCS, particularly between incumbent and new EU members. (2) Rising specialization does not decouple business cycles. (3) The decline of income disparities in EU27 contributes to BCS, as converging countries develop stronger trade and FDI linkages. (4) There is strong evidence that poor fiscal discipline of EU members is a major impediment of business cycle synchronization. (5) The same argument holds true for exchange rate fluctuations that hinder BCS, particularly in EU15. Since BCS is a fundamental prerequisite and objective in an effective monetary union, the EU has to promote market integration and strengthen the common setting of economic policies.

The effects of market integration on childhood growth and nutritional status: The dual burden of under‐ and over‐nutrition in the Northern Ecuadorian Amazon

Market integration is an important source of cultural change exposing indigenous populations to epidemiologic and nutrition transitions. As children and adolescents are biologically sensitive to the health effects of market integration, we examine community variation of anthropometric indicators of nutritional status and growth among a cross-cultural sample of Kichwa, Shuar, Huaorani, and Cofán indigenous groups in the northern Ecuadorian Amazon. We measured height, weight, body mass index (BMI), upper arm circumference, and triceps skinfolds of 186 children and adolescents aged 2 to 18 years from seven communities. Anthropometric z-scores were calculated based on the National Health and Nutritional Examination Survey. Comparisons were made with this US reference group, along with between community differences to contextually explore the impacts of varying degrees of market integration. We found a high prevalence of stunting in both boys (40%) and girls (34%). Adiposity increased with age and 40% of girls between 15 and 18 years old were overweight. There were large sex differences in body composition with higher BMI, arm circumference, and triceps skinfolds in adolescent girls. The Kichwa demonstrated the poorest growth outcomes and nutritional stress followed by the Huaorani and Shuar; yet distinctions in under- and over-nutrition were evident within groups. Market integration is a major factor influencing the developmental and lifestyle mismatch associated with the epidemiologic and nutrition transition in general, and the dual burden pattern of high rates of stunting yet adequate to above average short-term nutritional status indicators found among indigenous Amazonian populations.

The effects of market integration on childhood growth and nutritional status: The dual burden of under- and over-nutrition in the Northern Ecuadorian Amazon: Indigenous Childhood Nutritional Status

The effects of market integration on childhood growth and nutritional status: The dual burden of under- and over-nutrition in the Northern Ecuadorian Amazon: Indigenous Childhood Nutritional Status

Does market participation promote generalized trust? Experimental evidence from Southern Africa

Does market participation promote generalized morality and trust, as postulated by some recent theories? We use experimental data from Zimbabwe and Mozambique to probe into one specific component of this question, and find evidence to the contrary. The short-term effect of market integration appears to be to lower generalized trust. However, this finding is not robust across all countries.

The impact of terrorism on global equity market integration

In this paper we investigate the short-term contagion and long-term integration effects of terrorist activity on national stock markets. Using the partially integrated model of Bekaert et al. (Bekaert G, Harvey C and Ng A (2005) Market integration and contagion. Journal of Business 78: 39–69), we examine whether changes in cross-border relationships surrounding recent terrorist events are caused by changes in exposure to common risk factors and investigate whether these findings are similar across both developed and emerging market securities. Our research concludes that terrorism induces substantial contagion and market integration effects on national equity markets. Specifically, we provide strong evidence that major terrorist attacks induce substantial contagion consequences, particularly for developed nation equity markets. In terms of longer-term integration effects, a strong increase in cross-market correlation is observed from the pre to post-9/11 period. However, we find little evidence of an increase in the risk exposures of national markets to common risk factors, suggesting that this heightened correlation is driven by an increase in global risk factor uncertainty. This finding is consistent with the argument that an increase in the risk aversion of market participants is associated with terrorist attacks.

Trade and Growth in an Unequal Global Economy

This paper studies the patterns of trade and the incentives to innovate in an unequal global economy. We introduce non-homothetic preferences in a general-equilibrium model of endogenous growth and international trade between two countries, and argue that the effects of market integration on the consequent trade patterns and the incentives to innovate depend on the degree of income inequality across countries. We find that if inequality across countries is low, the extensive margin of trade between countries is high whereas the world growth rate is low. The introduction of non-homothetic preferences rises a number of interesting questions that are not an issue in the standard model. For example, we discuss the design of intellectual property rights, in particular national vs. international exhaustion of patents, and argue that households in poor and rich countries might not see eye to eye depending on how poor households weigh future losses in consumption against present gains. Furthermore, we address the welfare consequences of a trade liberalization, and show that households in the poor country might loose relative to households in the rich country if trade costs fall from a high to a sufficiently low level.

Pharmaceutical Price Convergence In The EU: Preliminary Results From The Panel Data Unit Root Test

This paper explores the case of market integration and price convergence in the European Union, specifically in the pharmaceutical industry. The EU has been experiencing market integration since 1992, through the removal of trade barriers, the establishment of a single market, and the reduction of exchange rate volatility. In addition, there have been several structural reforms in product markets designed to increase competition, monitor cross-country price differences and increase transparency. One anticipated effect of market integration is price convergence, because of the reduced potential for price discrimination across the EU. This paper is aimed to analyze market integration and price convergence in the European pharmaceutical market, which is the fifth largest industry in the EU. Since 1985, many EU directives have been adopted to achieve a single EU-wide pharmaceutical market, with the aim of enhancing the quality of life for European citizens and the European pharmaceutical industrys competitiveness and research and development capability. Using annual 19942003 IMS Health panel data from five EU countries on prices of drugs used to treat cardiovascular disease and controlling drug and market characteristics; this paper examines how the integration process has affected cross-country drug price dispersion in the EU through the preliminary results from the panel data unit root test. Finally, the results show some evidence of price convergence in the pharmaceutical market, with long term price differences arising from country fixed effects.

THE CLOSED-LOOP EFFECTS OF MARKET INTEGRATION IN A DYNAMIC DUOPOLY

This paper develops a dynamic game model of reciprocal dumping to reconsider welfare effects of market integration, i.e. reductions in transport costs. We show that welfare under trade is unambiguously less than welfare under autarky for any level of transport costs, which is impossible in static models where trade is profitable if the transport cost is low enough. This is because the negative effect through closed-loop property of feedback strategies dominates the positive effects.

Market integration between developing countries and urban unemployment–the perspective of the real minimum wage

This article examines the effect of market integration through free trade and factor mobility on the urban unemployment rate of a developing country whose economy is large enough to influence the terms of trade. From the perspective of the real minimum wage, it is shown that free trade would result in a rise or a decline in the country's urban unemployment rate, depending on its trade pattern. While the effect of labour mobility on a country's urban unemployment rate is determined by the difference between the ratio of would-be farmers to incoming workers and that of farm leavers to outgoing workers, the result of capital mobility will depend on a comparison of the initial urban unemployment rates of two countries.