This paper develops and implements an analytical framework combining spatial space techniques with panel stochastic frontier models to assess and benchmark time-varying market efficiency, with China’s pork market serving as the empirical application. We analyze spatial and temporal dynamics in adjustment speeds and compare inefficiency under a range of translog frontier specifications and market characteristics. The estimated market efficiency frontiers decline with greater geographic distances but improve with greater inter-market trade volume. Our analysis indicates that the Chinese pork market experiences significant inefficiencies (approximately 50%) in the speed of adjustment. The higher inefficiency is associated with rising diesel fuel prices. Roughly 35% of this inefficiency stems from short-term or transient shocks, and about 25% results from persistent, structural market characteristics. Overall, the study demonstrates that overlooking persistent inefficiency leads to an overestimation of the market’s ability to restore or maintain efficient spatial price transmission over time.
Mu et al. (Fri,) studied this question.
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