Tinbergen Institute Discussion Paper 2017-117/V
55 Pages Posted: 12 Dec 2017 Last revised: 18 Apr 2019
Date Written: April 1, 2019
We use spatial maize prices to estimate to what extent bridges in Mozambique lead to transport cost reductions and attribute these reductions to road distance and road quality. The applied methodology allows for potentially oligopolistic traders with spatially varying mark-ups. For identification we exploit the introduction of a road bridge over the Zambezi river, which creates variation in trading itineraries between markets. Estimations are based on monthly maize prices, in 24 markets, for five years before and after the introduction of the bridge. Estimates of the reduction of transport costs, averaged over itineraries, vary from 6% to 10%. Results are robust for non-random bridge placement and various other threats, and supported by observed transport cost data. Reduction in transport costs for particular itineraries varies more (up to 21%) and is roughly for two-third due to road distance and for one-third due to road quality.
Keywords: agricultural markets, transport costs, bridges, Mozambique, sub-Sahara Africa
JEL Classification: D23, D61, O13, O18, Q13, R41
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