Abstract

This paper addresses the role of market remoteness in explaining maize price volatility in Burkina Faso. A model of price formation is introduced to demonstrate formally that transport costs between urban and rural markets exac¬erbate maize price volatility. Empirical support is provided to the proposition by exploring an unusually rich data set of monthly maize price series across 28 markets over 2004–13. The methodology relies on an autoregressive conditional heteroskedasticity model to investigate the statistical effect of road quality and distance from urban consumption cen¬ters on maize price volatility. The analysis finds that maize price volatility is greatest in remote markets. The results also show that maize-surplus markets and markets bordering Côte d'Ivoire, Ghana and Togo have experienced more vola¬tile prices than maize-deficit and non-bordering markets. The findings suggest that enhancing road infrastructure would strengthen the links between rural markets and major consumption centers, thereby also stabilizing maize prices. (Résumé d'auteur) Document type: Book

Abstract

This paper examines the effects of market integration on household consumption using data on seven food and two energy markets across South Sudan. The analysis reveals that markets in South Sudan are highly segmented. Price differences for narrowly defined products, across cities exceed in some cases 100 percent. In addition, price volatility increased substantially following the imposition of the trade restrictions with Sudan. This increase tends to hurt disproportionately the poor, who cannot smooth purchasing decisions over time because of liquidity constraints. Transportation costs explain almost half of the variation in food prices across space, and improving the quality of roads has a large potential to reduce prices in the most expensive towns. On the basis of this price effect, the simulations suggest that bringing all road quality across states to that of primary roads can yield a reduction in poverty from the rate of 51.7 percent in 2009 to between 42.8 and 46.9 percent. These estimates have to be interpreted as conservative, as they do not take into account the second-order effects of road construction from increased trade that will result from better road connectivity. Document type: Book