Spatial Integration of Vegetable Markets of Sri Lanka during COVID-19 Pandemic

Abstract

The majority of the vegetables moving through traditional supply chains pass via Dambulla Dedicated Economic Centre (DDEC), which is the main wholesale market in Sri Lanka, to the regional markets. With the COVID-19 pandemic, the Sri Lankan government implemented several measures to keep vegetable markets of the country integrated. The objective of this study was to examine the degree of market integration of nine regional wholesale vegetable markets with DDEC in Sri Lanka during the COVID-19 pandemic. Pairwise comparisons between vegetable prices at DDEC and regional markets were done using Engle-Granger Co-integration test to achieve this objective. The analysis was carried out in the first differenced form, which conformed to the Augmented Dickey-Fuller (ADF) tests of stationarity. Short-run price disequilibrium was tested using Vector Auto-Regression Model (VAR) and Vector Error Correction Model (VECM). Weekly wholesale prices of beans, carrot, tomato, and brinjal markets during 2018-2021 were used for the analysis. The results revealed that only bean markets in Dehiaththakandiya, Thambuttegama, Nuwara Eliya, Meegoda, and Colombo wholesale vegetable markets depicted cointegrated behaviour with DDEC during the COVID-19 period. None of the other vegetable markets were integrated spatially with DDEC during the COVID-19 period. Before the pandemic, except in Ampara, Colombo and Dehiaththakandiya regional markets, all the other regional markets for beans, carrot, tomato, and brinjal were spatially integrated with DDEC either long run or short run. In conclusion, despite various government interventions to keep the vegetable market channels smoothly and consistently, the COVID-19 has negatively affected on price transmission of the vegetable marketing system of the country.