Abstract:
Coauthors: Craig McIntosh and Meredith Startz
High 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 in average prices overall. Contrary to the original aims of the platform, direct use by small-scale farmers is limited and almost all activity is among traders. Nonetheless, average trader profits decrease and farmer revenues increase in surplus markets, which we attribute to improved arbitrage and competition among traders. Since farmers are so numerous and the cost per-farmer is low, even small income gains per household aggregate to make the intervention strongly beneficial from an overall welfare perspective.