Unveiling dynamics: A comprehensive analysis of spatial integration in the Mexican food market

Abstract

This research aims to enhance our understanding of spatial integration within regional food markets, as measured by the Mexican Consumer Price Index, particularly by the degree of processing. In the initial phase, we employ a pairwise approach to examine the convergence of price differentials for each item across all city pairs included in the analysis. In the subsequent stage, we explore the factors – such as geographical and economic variables – that influence the likelihood of price convergence. Our findings reveal several key insights: (1) Our findings reveal several key insights: (1) there is no evidence supporting the hypothesis of market divergence across all three food processing categories; (2) unprocessed items demonstrate the highest level of integration and the shortest average half-life in terms of speed of adjustment; (3) the proportion of integrated price pairs for unprocessed food items remains relatively consistent across regions nationwide; and (4) geographical proximity, road infrastructure, and similarity in the number of stores significantly accelerate the convergence of market prices towards long-run equilibrium.