Market Integration between Cultured and Captured Species in Developing Countries: Lessons from Inland Areas in Bangladesh

Abstract

The study tested market integration between cultured fish (tilapia and pangasius) against captured fish (hilsa, swamp barb, prawn, wallago, and long-whiskered catfish) in the domestic market of Bangladesh. The Johansen cointegration framework was applied to identify market integration between cultured and captured species using monthly wholesale price data for the period January 2010 to May 2017. The study showed that the law of one price was rejected in all market pairs except the pangasius and long-whiskered catfish pair, suggesting imperfectly integrated markets. The study revealed mixed evidence of weak exogeneity tests, including cul tured and captured led markets as well as bidirectional relationships. Given the fact that cultured fish accounts for a substantial market share, the implication is that the supply growth of aquaculture, all other things being equal, reduces captured fish prices and, subsequently, reduces overexploitation, overcapacity, and the number of fishers in a situation where overexploitation is prevalent. This appears to lead to a double gain in the long run, with fish farmers producing and fishers catching more fish.