A Disaggregated Analysis of Product Price Integration in the Southern African Development Community

Abstract

Price-based empirical evidence on the extent to which product markets are integrated in developing regions is noticeably limited, particularly in Africa. This article uses highly disaggregated retail price data for twenty-four narrowly defined products collected at the district level in four Southern African Development Community (SADC) countries (Botswana, Malawi, South Africa and Zambia) to assess the extent to which product prices are integrated within and between these countries. We find evidence of large and persistent absolute deviations from the law of one price both within and between each of the four countries. Price dispersion is found to be higher between SADC countries than within the individual countries. On average, absolute price deviations between country pairs are smaller for countries adjacent to each other and for countries that share common membership in the Southern African Customs Union. Simple econometric estimates show that absolute price deviations between...