The Effect of Distance and Road Quality on Food Prices, Marketing Margins, and Traders' Wages: Evidence from Zaire

Major investments in infrastructure rehabilitation have been undertaken by govemments, development banks and donors in developing countries in recent decades. In Sub-Saharan Africa roaddeterioration isperceivedtobeoneofthemaincausesforthelimitedsupplyresponseafter price liberalization in agricultural markets. Studies of the quantitative effects on marketing margins are rare. This analysis shows that the wholesale -producer food price margin is strongly influenced by the quality of the road infrastructure. Evidence from Zaire shows that food prices decrease faster than transportation costs increase and that traders' wages are higher on bad roads. A trader's model incorporating uncertainty in input costs is used to explain this phenomenon.