Publications
Competition and Entry in Agricultural Markets: Experimental Evidence from Kenya (with Michael Dinerstein)
American Economic Review, vol. 110, no. 12, 3705-3747, December 2020. [Lead Article]
African agricultural markets are characterized by low farmer revenues and high consumer food prices. Many have worried that this wedge is partially driven by imperfect competition among intermediaries. This paper provides experimental evidence from Kenya on intermediary market structure. Randomized cost shocks and demand subsidies are used to identify a structural model of market competition. Estimates reveal that traders act consistently with joint profit maximization and earn median markups of 39%. Exogenously-induced firm entry has negligible effects on prices, and low take- up of subsidized entry offers implies large fixed costs. We estimate that traders capture 82% of total surplus.
Sell Low and Buy High: Arbitrage and Local Price Effects in Kenyan Markets (with Marshall Burke and Edward Miguel)
Quarterly Journal of Economics, vol. 134, no. 2, 785–842, May 2019
Large and regular seasonal price fluctuations in local grain markets appear to offer African farmers substantial inter-temporal arbitrage opportunities, but these opportunities remain largely unexploited: small-scale farmers are commonly observed to “sell low and buy high” rather than the reverse. In a field experiment in Kenya, we show that credit market imperfections limit farmers’ abilities to move grain inter-temporally. Providing timely access to credit allows farmers to buy at lower prices and sell at higher prices, increasing farm revenues and generating a return on investment of 28%. To understand general equilibrium effects of these changes in behavior, we vary the density of loan offers across locations. We document significant effects of the credit intervention on seasonal price fluctuations in local grain markets, and show that these GE effects shape individual level profitability estimates. In contrast to existing experimental work, the results indicate a setting in which microcredit can improve firm profitability, and suggest that GE effects can substantially shape microcredit’s effectiveness. In particular, failure to consider these GE effects could lead to underestimates of the social welfare benefits of microcredit interventions.
Working Papers
Scaling Up RCTs: Theory and Evidence from Ugandan Agriculture (with Benjamin Faber, Thibault Fally, Matthias Hoelzlein, Edward Miguel, and Andres Rodriguez-Clare)
Interventions aimed at raising agricultural productivity in developing countries have been a centerpiece in the global fight against poverty. These policies are increasingly informed by evidence from field experiments and natural experiments, with the well-known limitation that findings based on local variation generally do not speak to the general equilibrium (GE) effects if the intervention were to be scaled up to the national level. In this paper, we develop a new frame- work to quantify these forces based on a combination of theory and rich but widely available microdata. We build a quantitative GE model of farm production and trade, and propose a new solution method in this environment for studying high-dimensional counterfactuals at the level of individual households in the macroeconomy. We then bring to bear microdata from Uganda to calibrate the model to all households populating the country. We use these building blocks to explore the average and distributional implications of local shocks compared to policies at scale, and quantify the underlying mechanisms.
Search Costs, Intermediation, and Trade: Experimental Evidence from Ugandan Agricultural Markets (with Craig McIntosh and Meredith Startz, draft available upon request)
Search costs may be a barrier to market integration in developing countries, harming both producers and consumers. We present evidence from the large-scale experimental rollout of a mobile phone-based marketplace intended to reduce search costs for agricultural commodities in Uganda. We find that market integration improves substantially: trade increases and excess price dispersion falls by 20% between treated markets. This reflects price convergence across relative surplus and deficit markets, with no change on average. Interpreting the experimental variation through the lens of a model with fixed costs of search, we estimate that the marketplace caused a 5% reduction in total trade costs between treated markets. Contrary to the stated goals of the marketplace, but consistent with the existence of economies of scale in search or other trade costs, almost all activity on the platform is among larger traders, with very little use by smallholder farmers. Nevertheless, the benefits of improved arbitrage by traders appears to pass through to farmers in the form of higher revenues in surplus markets, as trader entry increases and measured trader profits decrease in response to falling search costs.
Works in Progress
Quality Upgrading and Market Structure (with Jie Bai, Ameet Morjaria, and Yulu Tang)
Two-Sided Markets: Evidence from the Ghana Commodity Exchange (with Lorenzo Casaburi, Yaw Nyarko, and Christopher Udry)
Quality, Contracting, and Competition in Developing Country Supply Chains (with Max Huppertz and Meredith Startz)