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

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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. Our empirical findings are consistent with a search cost framework à la Mortensen, but inconsistent with other models, such as Bertrand competition, bilateral bargaining, Cournot oligopsony.

Last updated on 10/25/2015