Brian Dillon

Agricultural factor markets in Sub-Saharan Africa: An updated view with formal tests for market failure

This paper uses the recently collected Living Standard Measurement Study–Integrated Surveys on Agriculture Initiative data sets from five countries in Sub-Saharan Africa to provide a comprehensive overview of factor market participation by agrarian households and to formally test for failures in rural markets. Under complete and competitive markets, households can solve their consumption and production problems separately, so that household factor endowments do not predict input demand. This paper implements a simple, theoretically grounded test of this separation hypothesis, which can be interpreted as a reduced form test of market failure. In all five study countries, the analysis finds strong evidence of factor market failure. Moreover, those failures appear general and structural, not specific to subpopulations defined by gender, geography, human capital, or land quality. However, we show that rural markets are not generally missing in an absolute sense, suggesting that market existence is less of a problem than market function.

Global Oil Prices and Local Food Prices: Evidence from East Africa

It is widely believed that oil prices impact food prices in developing countries. Yet rigorous evidence on this relationship is scarce. Using maize and petrol price data from east Africa, we show that global oil prices do affect food prices but primarily through transport costs, rather than through biofuel or production cost channels. We find that global oil prices transmit much more rapidly to the pump and then to local maize prices than do global maize prices, suggesting that the immediate effects of correlated commodity price shocks on local food prices are driven more by transport costs than by the prices of the grains themselves. Furthermore, we present suggestive evidence that, for markets furthest inland, changes in world oil prices have larger effects on local maize prices than do changes in world maize prices.

Selling Crops Early to Pay for School: A Large-Scale Natural Experiment in Malawi

In 2010, primary school in Malawi began in September, three months earlier than in 2009. Difference-in-difference specifications show that this change forced households to sell crops early, when prices are low. The effect is limited to households with school children, increases in the number of such children, and is only present for poor households. Households that sold early missed out on an expected 25% increase in prices over three months. The implication is that liquidity constraints exacerbate the negative effects of seasonal crop price cycles, which may reduce the benefits of harvest-period commitment devices by undercutting opportunities for inter-temporal arbitrage.In this paper we use a natural experiment from Malawi to test the hypothesis that short - term expenditure needs force poor households to sell crops early, when output prices are well below their peak. The experiment comes from a change in the timing of the primary school calendar. In 2010, the school year began in September, three months earlier than in 2009. Although there is no primary school tuition in Malawi, households still incur substantial out -of-pocket school costs. We use difference – in - difference and triple difference specifications to show that the cumulative value of household- level crop sales made before September was significantly higher in 2010 than in 2009. This effect is limited to households with school-aged children, is increasing in the number of school-aged children, and is only present for households in poverty for whom the opportunity cost of liquidity is higher. Because crop prices rise substantially over the last quarter of the calendar year, back - of-the-envelope estimates indicate that poor households paid a per - child penalty of 366 - 1221 Malawi kwacha (2.5-8.5 USD) to finance school expenses three months earlier in 2010 than in 2009. More broadly, these findings highlight the high cost of liquidity for poor households, and provide empirical support for the concern that intra - annual price volatility exacerbates the negative impacts of liquidity constraints.

How Competitive Are Crop Markets in Sub-Saharan Africa?

&NA; During the structural adjustment era of the 1980s and 1990s, governments across sub‐Saharan Africa generally withdrew from crop markets to encourage entry by private traders and foster competition. Since that time, the degree of competition in crop markets has been a central concern of policymakers, donors, and researchers. We review the evidence on that topic by first developing a conceptual framework to guide our analysis, then discussing the findings from four categories of literature. We have two main findings. First, there is a paucity of empirical evidence on this question, which hinders our ability to draw strong conclusions. Second, that point notwithstanding, the evidence that does exist is broadly supportive of the notion that crop markets are competitive. The dominant themes in the literature are that trading profits are highly variable, trader entry and exit rates are high, and price co‐movements between markets suggest relatively efficient levels of competitive arbitrage. It is possible that the high costs of entry foster non‐competitive conditions at the level of large‐scale, long‐distance subnational trade, but we find no positive evidence to that effect, only the satisfaction of certain necessary conditions.

eKichabi: Information Access through Basic Mobile Phones in Rural Tanzania

This paper presents eKichabi, a tool for retrieving contact information for agriculture-related enterprises in Tanzania. eKichabi is an Unstructured Supplementary Service Data (USSD) application which users can access through basic mobile phones. We describe our focus groups, a design iteration, deployment in four villages, and follow up interviews by phone. This work demonstrates the feasibility of USSD for information access applications that have the potential for deployment on a large scale in the developing world. From user interviews, we identified strong evidence of eKichabi fulfilling an unmet need for business related information, both in identifying business contacts in other villages, as well locating specific service providers. One of our key findings demonstrates that users access information through multiple modes, including text search, in addition to menu navigation organized by both business sector category and geographic area.

How Complete are Labor Markets in East Africa? Evidence from Panel Data in Four Countries

We develop new tests for the completeness of rural labor markets. The tests are based on a theoretical link between a shortage or surplus in the labor market and asymmetric responses to changes in household composition over time. We develop auxiliary tests to distinguish other types of market failures from labor market failures, and provide evidence that most changes in household composition are exogenous to local labor market conditions. We implement our test using nationally representative panel data from Ethiopia, Malawi, Tanzania, and Uganda. The overall pattern is one of excess supply of labor in rural areas, but there is substantial heterogeneity across cultivation phases, genders, and agro-ecological zones. Excess supply of labor is most evident during low-intensity cultivation phases (e.g., weeding). In Ethiopia, findings suggest that poor households face a de facto labor shortage, driven more by financial market failures than a physical shortage of available workers. There is evidence of partial gender segmentation in labor markets. In all four countries, women are more difficult to replace than men.

Inheritance Customs and Agricultural Investment

This paper examines the connection between widows’ land inheritance rights and land investments in Zambia. We study whether the threat of land expropriation upon widowhood deters households from fallowing, applying fertilizer, and employing labor-intensive tillage techniques. Variation in widow inheritance is based on customary village practices, which we observe in surveys of village leaders. Controlling for possible confounding factors, both OLS and IV estimates show lower levels of land investment by married couples in villages where widows do not inherit. Concern over prospective loss of land by the wives reduces investment in land quality even while the husband is alive.

How Competitive are Food Crop Markets in Sub-Saharan Africa?

During the structural adjustment era of the 1980s and 1990s, governments across sub-Saharan Africa generally withdrew from food markets in order to encourage entry by private traders and foster competition. Since that time, the degree to which private crop traders actively compete and pass on price changes to farmers has been a central concern of policymakers, donors, and researchers. In this paper we provide a critical review of the evidence on that topic. We begin by developing an analytical framework to guide the review, and then discuss the empirical evidence from four categories of literature. We have two main findings. First, there is a paucity of empirical evidence on this question, given the importance of the topic. This hinders our ability to draw strong conclusions. Second, that point notwithstanding, the evidence that does exist is broadly supportive of the notion that food markets are competitive. The dominant themes in the literature are that trading profits are highly variable, which is consistent with substantial risk, that trader entry and exit rates are high, and that price co-movements between markets suggest relatively efficient levels of competitive arbitrage. It is possible that the high costs of entry foster non-competitive conditions at the level of large-scale, long-distance subnational trade; but we find no positive evidence to that effect, only the satisfaction of certain necessary conditions.

Paying more for less: why don't households in Tanzania take advantage of bulk discounts?

Do poor households shop in a way that leaves money on the table? A simple way to maximize consumption, conditional on available cash, is to avoid regularly purchasing small amounts of nonperishable goods when bulk discounts are available at modestly larger quantities. Using two-week transaction diaries covering 48,501 purchases by 1,493 households in Tanzania, this paper finds that through bulk purchasing the average household could spend 8.7 percent less without reducing purchasing quantities. Several explanations for this pattern are investigated, and the most likely mechanisms are found to be worries about over-consumption of stocks and avoidance of social taxation. Contrary to prior work, there is little indication that liquidity constraints prevent poorer households in the sample from buying in bulk, possibly because the bulk quantities under examination are not very large.