Is IT Enough? Evidence from a Natural Experiment in India's Agriculture Markets

Abstract

Access to information and communication technologies (ICTs) such as mobile phone networks is widely known to improve market efficiency. In this paper, we examine whether access to timely and accurate information provided through ICT applications has any additional impact. Using a detailed dataset from Reuters Market Light (RML), a text message service in India that provides daily price information to market participants, we find that this information reduces the geographic price dispersion of crops in rural communities by an average of 12%, over and above access to mobile phone technology and other means of communication. To identify the effect of information on price dispersion we exploit a natural experiment where bulk text messages were banned unexpectedly across India for 12 days in 2010. We find that besides reducing geographic price dispersion, RML also increases the rate at which prices converge across India over time. We discuss the implications of this for development organizations and information providers.

Keywords: price dispersion, information and communication technology, natural experiment, agriculture supply chains