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.
This study empirically estimated the degree of integration in cotton markets of Pakistan’s Punjab using the law of
one price (LOP) framework and cointegration analysis. Cointegration Results show that all seed cotton markets
are highly integrated in the long run. Regression results show that government intervention in terms of
seed cotton procurement negatively influenced the degree of market integration. The high
degree of market integration observed in this case is consistent with view that Punjab’s seed cotton markets are
quite competitive and provide little justification for extensive and costly government intervention designed to
improve competitiveness to enhance market efficiency.
