Trains, trade, and transaction costs: How does domestic trade by rail affect market prices of Malawi agricultural commodities?

Wouter Zant*

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review

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Abstract

We measure the impact of low-cost transport by rail in Malawi on the dispersion of agricultural commodity prices across markets by exploiting the quasi-experimental design of the nearly total collapse of domestic transport by rail in January 2003 due to the destruction of a railway bridge at Rivirivi, Balaka. Estimations are based on monthly market prices of four agricultural commodities (maize, groundnuts, rice, and beans) in 27 local markets for the period 1998-2006. Market pairs connected by rail when the railway line was operational are intervention observations. Railway transport services explain a 14 to 17 percent reduction in price dispersion across markets. Geographical reach of trade varies by crop, most likely related to storability and geographical spread of production. Perishability appears to increase impact, reflecting limited scope for arbitrage. Overall, impacts are remarkably similar in size across commodities.

Original languageEnglish
Pages (from-to)334-356
Number of pages23
JournalWorld Bank Economic Review
Volume32
Issue number2
Early online date3 Apr 2018
DOIs
Publication statusPublished - Jun 2018

Keywords

  • Crop prices
  • Domestic trade
  • Malawi
  • Rail infrastructure
  • Sub-Sahara Africa
  • Transaction costs

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