February 16, 2008
The Impact of Cell Phones on Grain Markets in Africa's Niger
A new research study published by the Center for Global Development has looked at the impact of mobile phones on the prices of farm produce in the African country of Niger - which faced serious food shortages in 2005.
In theory, the increasing use of mobile phones should have improved distribution efficiency and hence lower the variations in prices around the country. The study set out to see if that was the case.
... As grain markets occur only once per week, traders have historically traveled long distances to potential sales markets to obtain information on supply, demand and prices. Between 2001 and 2006 though, cell phone service was phased in throughout Niger, providing an alternative and cheaper search technology to grain traders and other market actors.
To test the predictions of the theoretical model, the researchers use a unique market and trader dataset from Niger that combines data on prices, transport costs, rainfall and grain production with cell phone access and trader behavior. They first exploited the quasi-experimental nature of cell phone coverage to estimate the impact of the staggered introduction of information technology on market performance.
The results provide evidence that cell phones reduce grain price dispersion across markets by a minimum of 6.4 percent and reduce intra-annual price variation by 10 percent. Cell phones have a greater impact on price dispersion for market pairs that are farther away, and for those with lower road quality.
Read full article.
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