Railways and grain price convergence in Meiji Japan

The Meiji Era saw the introduction and development of railways in Japan. Railroads can lower transportation costs and create arbitrage opportunities for merchants in different markets. When merchants engage in arbitrage, prices converge. Using Bayesian mean-shifting autoregressions, we investigate grain price convergence between 1875 and 1912 for six locations in Japan. Consistent with previous literature, we find that agricultural markets were already integrated in the early Meiji Period. Prices for most location pairs converge further by the end of the era. Shifts in mean price differentials are associated with connection via the rail network for some market pairs and commodities, but not with the nationalization of major private rail lines in 1906.