Abstract
Regional market integration in many agricultural commodities has been extensively studied for the insight it
provides into the functioning of such markets; such studies provide valuable information about the dynamics of
market adjustments, and whether there exist market imperfections, which may justify government intervention. In
the case of widely spatially dispersed regional food markets in developing countries, the nature and extent of
market integration is of particular importance. Periodic localized supply shortages are common and have the
potential to create major food security problems. Further, various market imperfections, such as entrenched
monopolies/monopsonies and inadequate and costly information transmission, hinder the attainment of market
efficiency, and may constrain sustainable agricultural development and aggravate inequitable pattern of income
distribution. This study empirically estimated the degree of integration in wheat markets using the law of one price
(LOP) framework and cointegration analysis. Results show that wheat markets are perfectly integrated and
Lahore is the dominating market. This high degree of market integration provides little justification for extensive
and costly government intervention designed to improve the market efficiency.
