Post offices and British Indian grain price convergence

Abstract

ABSTRACT There is a large literature on the impact of railways on price convergence. Ignored, however, is the role of another potentially important network: post offices. By providing timely information on arbitrage and trade opportunities, post offices could also contribute to market integration. This paper tests that proposition in the context of British Indian grain markets. Rice and wheat markets in colonial India saw a broad convergence in prices during the late nineteenth and early twentieth centuries. Research suggests that railways mattered, but are capable of explaining only some of that convergence. This paper tests whether the spread of post offices also contributed to that price convergence. We find that it did, though the effects shrink in the presence of railways. Estimates suggest that between 1881 and 1911, post office growth reduced price dispersion by 20–24% of the total decline in Indian grain price dispersion. The precise mechanism through which these effects operate, however, is less clear.