Mobile Phones and Mozambique Traders: Size, Composition and Distribution of Reduced Transaction Costs

Abstract

I use unique transport cost data along with spatial market prices to measure the size, composition and distribution of reduced transactions costs due to the roll-out of the mobile phone network in Mozambique. My estimations are based on weekly transport costs of maize grain and weekly maize market prices. The mobile phone roll-out explains a 9%-15% reduction in the spatial price dispersion of maize. The evidence suggests that 70% to 80% comes from lower transport costs. Traders use mobile phones for multiple alternative purposes which explains the large contribution of transport costs. The evidence also indicates that the reduction in spatial price dispersion corresponds with a relatively large drop in destination markets’ prices: the benefits of mobile phones appear to accrue mainly to urban consumer markets and much less to producer areas. My results are robust for the non-random roll-out of the mobile phone network and several other threats, and align with evidence found elsewhere in the literature.