Mobile Phones and Mozambique Farmers: Less Asymmetric Information and More Trader Competition?

Abstract

We investigate search costs for farmers and traders, by measuring how the introduction of mobile phones in Mozambique affected maize producer prices and traders' margins. Our estimations are based on weekly producer and retail prices of white maize grain, from July 1997 to December 2009, for 15 major producer markets in Mozambique. We find margin increases and producer price decreases between 14% and 22%, indicating benefits for traders.Our results are consistent with estimates based on household survey data, and are robust to non-random rollout of the mobile phone network and various other threats. We investigate heterogeneity of impacts to find underlying causes: the impacts on margins are negatively correlated with competitiveness and positively correlated with gains from long-distance trade.The impacts on household sale prices are not significantly correlated with wealth and educational attainment. Impacts on producer prices, however, become less negative over time, suggesting delayed adoption by farmers.