Impact of Mobile Phones on Staple Food Markets in Mozambique: Improved Arbitrage or Increased Rent Extraction?

Abstract

I exploit the quasi experimental nature of the roll-out of the mobile phone network from 1997 to 2009 in Mozambique, to estimate impact of search costs on the dispersion of maize prices and transport costs. The rollout explains a 4.5-11 percent reduction in maize price dispersion, and a larger reduction in per ton km transport costs. Traders benefit by capturing more rent income. Increased efficiency is mainly associated with lower prices for consumers. Various sources of heterogeneity are identified: the reduction is larger for markets that are far apart, for source markets with higher mobile phone coverage and during droughts.