ABSTRACT
This chapter analyzes the emergence and expansion of markets in developing countries. It explores to what extent markets for similar goods are integrated over large geographical areas in developing countries. The chapter examines how to measure market integration and what are the biggest obstacles to it in developing countries. It describes the link between institutions and market development. The chapter describes the specific problems affecting market development in poor countries: higher transaction costs, higher costs of court proceedings, and issues with transportation and communication infrastructure. It explains the role of business networks in market development. Rural markets suffer from all the problems namely weak institutions, poverty, lack of communications technology, long distances, and high transportation costs. High inventories of food in some areas can coincide with starvation in others, and lack of market integration due to the causes identified may lead to famines that could otherwise be prevented if there were better market integration.
