Impact of Mobile Phones on Staple Food Markets in Mozambique : Improved Arbitrage or Increased Rent Extraction?

We investigate to what extent the roll-out of the mobile phone network in Mozambique reduced search costs, and thereby lowered transport costs and improved the efficiency of agricultural markets. Estimations are based on data of both maize market prices and transport costs of maize grain. Evidence suggests improved arbitrage jointly with increased rent extraction by traders: the rollout explains a 4.5-7 percent reduction in maize price dispersion, and a slightly larger reduction in per ton km transport costs. Benefits of increased market efficiency are not biased towards either producer or consumer markets. Results are robust for non-random rollout of the mobile phone network and several other threats