Measuring the Impact of Road Rehabilitation on Spatial Market Efficiency in Maize Markets in Mozambique

Agricultural Economics 02/2008; 39(1):17-28. DOI: 10.1111/j.1574-0862.2008.00311.x

Posted: 26 Nov 2014

See all articles by Channing Arndt

Channing Arndt

United Nations - World Institute for Development Economics Research (UNU/WIDER)

X. Cirera

Institute of Development Studies; World Bank

Date Written: February 2008

Abstract

This article analyzes the impact of road rehabilitation on the spatial market efficiency of maize markets in Mozambique. We estimate a modified version of the Parity Bounds Model (PBM) that allows us to test the impact of road rehabilitation on spatial efficiency. This article seeks to contribute to the existing literature in three ways. First, a unique data set, where road rehabilitation episodes between market pairs are identified, is developed. Second, special care is devoted to estimation of transaction costs due to the sensitivity of the PBM model to the quality of transaction costs estimates. Finally, as opposed to most existing literature that focuses on relatively distant markets, the article focuses on spatially closed markets. We find that maize markets tend to be segmented due to high transport costs. Following road rehabilitation, inefficiency and average absolute price differentials tend to decrease, and market pairs have tended to shift toward autarky regimes. Overall, while the results point broadly toward a positive impact of road rehabilitation on spatial efficiency, they are not as strong or as robust as one would like. Large increases in fuel prices likely offset the positive impacts of road rehabilitation on transaction costs, contributing to the increase in the probability of being in an autarky regime.

Suggested Citation

Arndt, Channing and Cirera, Xavier, Measuring the Impact of Road Rehabilitation on Spatial Market Efficiency in Maize Markets in Mozambique (February 2008). Agricultural Economics 02/2008; 39(1):17-28. DOI: 10.1111/j.1574-0862.2008.00311.x . Available at SSRN: https://ssrn.com/abstract=2530569

Channing Arndt (Contact Author)

United Nations - World Institute for Development Economics Research (UNU/WIDER) ( email )

Katajanokanlaituri 6 B
Helsinki, FI‐00160
Finland

Xavier Cirera

Institute of Development Studies ( email )

University of Sussex
Falmer, Brighton, East Sussex BN1 9RE
United Kingdom

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Register to save articles to
your library

Register

Paper statistics

Abstract Views
131
PlumX Metrics