Market Access, Trade Costs, and Technology Adoption: Evidence from Northern Tanzania

60 Pages Posted: 12 Nov 2018

See all articles by Shilpa Aggarwal

Shilpa Aggarwal

Indian School of Business (ISB), Hyderabad

Brian Giera

Independent

Dahyeon Jeong

University of California, Santa Cruz - Department of Economics

Jonathan Robinson

University of California, Santa Cruz

Alan Spearot

University of California, Santa Cruz

Date Written: November 2018

Abstract

In this paper, we quantify market access in rural Tanzania, and the extent to which it constrains agricultural productivity. We collect granular data on farmer input and sales decisions, input and output prices, and travel costs in all 1,183 villages in two regions of Tanzania. We find that a village in the 90th percentile of the travel-cost adjusted price distribution faces input and output prices 40-55% less favorable than a village at the 10th percentile. In reduced form, an additional standard deviation of travel time is associated with 20-25% lower input adoption and output sales. We develop and quantify a spatial model of input adoption and conservatively estimate that farmers behave as if they face travel costs of 6% ad-valorem per kilometer of travel, which is equivalent to 40% when traveling to the closest retailer. Holding exogenous local factors fixed, we estimate that reducing travel costs by 50% (approximately the effect of paving rural roads) doubles adoption and reduces the adoption-remoteness gradient by 18%.

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Suggested Citation

Aggarwal, Shilpa and Giera, Brian and Jeong, Dahyeon and Robinson, Jonathan and Spearot, Alan, Market Access, Trade Costs, and Technology Adoption: Evidence from Northern Tanzania (November 2018). NBER Working Paper No. w25253. Available at SSRN: https://ssrn.com/abstract=3282953

Shilpa Aggarwal (Contact Author)

Indian School of Business (ISB), Hyderabad ( email )

Hyderabad, Gachibowli 500 019
India

Brian Giera

Independent ( email )

No Address Available

Dahyeon Jeong

University of California, Santa Cruz - Department of Economics ( email )

1156 High Street
Santa Cruz, CA
United States

Jonathan Robinson

University of California, Santa Cruz ( email )

1156 High St
Santa Cruz, CA 95064
United States

Alan Spearot

University of California, Santa Cruz ( email )

1156 High St
Santa Cruz, CA 95064
United States

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