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

Abstract

We investigate the impact of search costs of farmers and traders on prices, by measuring to what extent the introduction of mobile phones in Mozambique has affected maize producer prices, retail market prices and margins. Estimations are based on weekly recorded producer and retail market prices of white maize grain, from July 1997 to December 2009, for 15 major producer markets in Mozambique. We find a margin increase varying from 6.4% to 11.5%, and a drop in producer prices of 8.1% to 14.0%, supporting a bias of benefits towards traders. Hence, not less asymmetric information and more trader competition, but rather the reverse: traders benefit more from exploiting mobile phone opportunities. Estimation results are robust to non-random roll-out of the mobile phone network and various other threats. Margin impacts correlate significantly with terminal market prices. Household survey data yield an impact on farm-gate prices that is consistent with the key result of this study. Several farmer characteristics reveal a weak but plausible correlation with the drop in farm-gate prices.