Tavneet Suri

Rural Roads and Intermediated Trade: Regression Discontinuity Evidence from Sierra Leone

Using a road-level regression discontinuity design in Sierra Leone, we study the impacts of improvements in rural road infrastructure on crop prices in rural markets. We show that the improved roads reduced market prices of local crops. These price effects are stronger in markets that are further from major urban centers and in less productive areas. In addition, these price effects are reversed in areas with better cell phone penetration. We show that our empirical findings are consistent with a search cost framework a la Mortensen, but inconsistent with other models, such as Bertrand competition, bilateral bargaining, Cournot oligopsony.

The long-run poverty and gender impacts of mobile money

Substituting minutes for money In developing countries, bank branches and fixed-line telecommunications are scarce, whereas mobile phones are plentiful. These factors have led to the use of mobile money, whereby money can be deposited to an account linked to a phone, transferred to other users, and converted back into cash. Suri and Jack show that increased access to mobile money has increased long-term consumption in Kenya and reduced the number of households in extreme poverty. Science, this issue p. 1288 Mobile phone–based digital financial services have improved economic well-being in Kenya, particularly in female-lead households. Mobile money, a service that allows monetary value to be stored on a mobile phone and sent to other users via text messages, has been adopted by the vast majority of Kenyan households. We estimate that access to the Kenyan mobile money system M-PESA increased per capita consumption levels and lifted 194,000 households, or 2% of Kenyan households, out of poverty. The impacts, which are more pronounced for female-headed households, appear to be driven by changes in financial behavior—in particular, increased financial resilience and saving—and labor market outcomes, such as occupational choice, especially for women, who moved out of agriculture and into business. Mobile money has therefore increased the efficiency of the allocation of consumption over time while allowing a more efficient allocation of labor, resulting in a meaningful reduction of poverty in Kenya.

Documenting the birth of a financial economy

The birth and explosive growth of mobile money in Kenya has provided economists with an opportunity to study the evolution and impact of a new financial system. Mobile money is an innovation that allows individuals to store, send, and receive money on their mobile phone via text message. This system has opened up basic financial services to many who were previously excluded, and has had real and measurable impacts on the ability of households to protect themselves against health risks. Using a unique survey instrument covering nearly 2,300 households over 2008–2010, we first document the lightning-fast adoption of mobile money in Kenya, which was faster than most documented modern technologies in the United States. We then present evidence on how this innovation allows households to respond better to unexpected adverse health events. We find that in the face of these events, users of mobile money are better able to tap into remittances to finance additional health care costs without having to forego necessary expenditures on education, food, and other consumption needs.

Research and Impacts of Digital Financial Services

A growing body of rigorous research shows that financial services innovations can have important positive impacts on wellbeing, but also that many do not. We first describe the latest evidence on what works in financial inclusion. Second, we summarize research on key financial market failures and on products and innovations that address specific mechanisms underlying them. We conclude by highlighting open areas for future work.

The Curious Case of e-Governance

A key role of government in developing economies is building institutions that support firms over their lifecycle. However, real politics creates immense regulatory rigidity. IT presents a tremendous opportunity to address corruption and efficiency, yet it must incorporate appropriate investments in reducing regulatory rigidity and strengthening institutions.