Risk, arbitrage, and spatial price relationships: Insights from China's hog market under the African Swine Fever
利用非洲猪瘟疫情后生猪跨省调运禁令作为自然实验，研究中国各省生猪价格的空间联动机制，发现禁令后距离削弱了价格联系，表明不完全公共信息下的套利不足导致市场暂时分割。
Spatial market integration, an important means to increase market efficiency and boost economic development, is often affected by policy changes such as trade liberalization and trade restrictions. With unique weekly data on provincial hog prices, we use the 2018 outbreak of African Swine Fever (ASF) in China and the subsequent ban on cross-province shipment of hogs as a natural experiment to study dynamic spatial mechanisms underlying market integration. We employ a high-dimensional spatial model to estimate pairwise inter-province price links over several periods around the ASF outbreak for 29 Chinese provinces. Regressions reveal that a greater inter-province distance weakens the spatial price links post-ban, but not before the ban, which indicates insufficient arbitrage under imperfect public information regarding ASF. The temporary market segmentation implies substantial dead-weight-loss. Our findings highlight the role of public information on risks in maintaining market integration and efficiency under supply-side disruptions.