Border Effects on Spatial Price Transmission between Fresh Tomato Markets in Ghana and Burkina-Faso: Any Case for Promoting Trans-Border Trade in West Africa?

Cross-border trade in food commodities within sub-regional economic blocks in Sub-SaharaAfrica (SSA) is believed to be faster, cheaper, more convenient and welfare-enhancing thanoverseas trade between SSA countries and the USA, EU and the BRIC countries. Thedifficulty of commodity arbitrage across international borders SSA is however a fundamentalconstraint to price transmission, market integration and the realisation of the welfareenhancingrole of cross-border trade in Africa. This study examines the impact of border anddistance on price transmission between tomato markets in Ghana and Burkina-Faso. Theanalysis applies a regime-switching vector error correction model to estimate semi-weekly,wholesale prices of tomato in four tomato markets in Ghana and a production centre inBurkina-Faso. Estimated parameters of price transmission contain evidence of border anddistance effects. This is expected since high transfer costs, including cross-border tariffs areincurred by traders in moving tomato across the border. Moreover, the perishable nature oftomato, and the poor quality of roads and transportation facilities may imply additional costsof risks to arbitrageurs. The findings have both theoretical relevance and practicalimplications for facilitating cross-border trade in West Africa, especially for trade betweenlandlocked countries like Burkina-Faso and coastal ones like Ghana.