Determinants Of Domestic Food Price Differentials In Uganda: The Potential for and Constraints on Intra-County Trade

Abstract

This paper examines the determinants of price differentials across 79 districts in Uganda. It identifies the main production areas for key agricultural commodities and consumption destinations. In the framework of the law of one price, the paper examines the hypothesis that spatial price differentials are at least partly influenced by transportation and other transaction costs, infrastructural constraints, productivity and commodity output shocks and the purchasing power of households. This is done through an estimation of the determinants of price differentials of commodities across districts. The study notes the wide range of price differences across the country, which, to a large extent, can be attributed to the interaction between remoteness and physical infrastructure. The effect of per capita income on price differentials is relatively uniform across commodities. The findings point to the importance of strengthening the capacities of farmers and their productivity as a means of improving their livelihoods and fostering more efficient markets with faster supply responses to changes in prices. The findings further emphasize the significance of spatial dimensions and infrastructure conditions in Uganda, thus suggesting that infrastructural development must be a focus to reduce price differentials in the country.