" Food Prices, Road Infrastructure, and Border Effects in Central and Eastern Africa " Paul Brenton Alberto Portugal Julie Regolo.

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Presentation transcript:

" Food Prices, Road Infrastructure, and Border Effects in Central and Eastern Africa " Paul Brenton Alberto Portugal Julie Regolo

2 Outline 1. Introduction 2. Empirical strategy 3. Data 4. Results 5. The way forward

3 1. Introduction Huge potential for cross-border trade in East and Central Africa with implications for food security and poverty reduction (World Bank, 2012) Price differences: arbitraged away through intraregional trade in well-integrated and well-functioning markets (Law of one Price) Barriers to market integration (poor roads or high transport costs, inefficient customs, etc) prevent arbitrage: large price dispersion and welfare cost

4 1. Introduction Research question: By how much do road infrastructure and national borders account for deviations from the Law of one price (LOP) in East and Central Africa? Few papers on “border effects” in Africa (Aker et al., 2012; Versailles, 2012). Data:  Monthly price for Sorghum, Maize and Rice.  152 towns in 13 countries from Eastern and Central Africa. ( Burundi, Djibouti, DRC, Malawi, Ethiopia, Kenya, Mozambique, Rwanda, Somalia, SudanTanzania, Uganda, Zambia).  Detailed data on road infrastructure, quality and travel time.

5 2. Empirical strategy The Law of one price (absolute and relative version): Where : price in town i for good k and month t. Borderij is a dummy equal to 1 if tows i and j are in different countries (I and J), 0 otherwise. Price stickiness: add monthly nominal exchange rate variation: Distance equivalents: Country heterogeneity effect (Gorodnichenko and Tesar, 2009): add country dummies and provide lower and upper bounds for border effects.

3. Data Price data for 3 commodities (Maize, Sorghum, and Rice): Fewsnet and FAO for 152 towns in 13 countries. May 2008-Oct Detailed dataset on the road network in these countries : GIS. Road length and quality.

7 Results 1 : Results 1 : Border and roads effects in the region

Results 2 : Results 2 : Border and roads effects in the region

9 Results 3. Specific border effects BorderCoefficient Distance equivalent BorderCoefficient Distance equivalent SDN-KEN kmRWA-DRC0.0956***50km TZA-BDI kmTZA-RWA0.0978***55km TZA-KEN kmSDN-ETH0.107***80km UGA-SDN kmDRC-BDI0.109***87km UGA-TZA kmTZA-MWI0.125***168km ZMB-TZA kmTZA-DRC0.133***233km UGA-KEN kmUGA-DRC0.149***449km MWI-MOZ0.0425***6kmKEN-ETH0.160***704km TZA-MOZ0.0539***9kmZMB-MWI0.163***797km UGA-RWA0.0723***19kmZMB-MOZ0.167***938km RWA-BDI0.0736***20kmSOM-KEN0.191***2'510km SOM-DJI0.0844***32kmZMB-DRC0.306***279'563km SOM-ETH0.388***8'053'677km

5. Conclusion High impact of distance and road quality on relative prices (17%) Moderate border effects in the region (13%) Disparities in border effects between countries: highest:Ethiopia-Somalia; lowest: Tanzania- Zambia. Market integration: low both between and within some African countries (bans, competition in the provision of transport and logistics services, …)

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