ABSTRACT
A commonly employed method for measuring the integration between agricultural markets in developing countries is that of correlating time series of price data for different market-places and products. This procedure builds on the rationale that if markets are perfectly competitive and spatially well integrated, differences in prices between markets will reflect transport and processing costs only and the bivariate correlation coefficient between a pair of such time series of prices will be equal to one. A lower correlation, according to this reasoning, will reflect bottlenecks arising e.g. from lack of market information, lack of product homogeneity or monopoly power.
