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Trains, Trade, and Transaction Costs: How Does Domestic Trade by Rail Affect Market Prices of Malawi Agricultural Commodities?

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  • Wouter Zant

Abstract

We measure the impact of low-cost transport by rail in Malawi on the dispersion of agricultural commodity prices across markets by exploiting the quasi-experimental design of the nearly total collapse of domestic transport by rail in January 2003 due to the destruction of a railway bridge at Rivirivi, Balaka. Estimations are based on monthly market prices of four agricultural commodities (maize, groundnuts, rice, and beans) in 27 local markets for the period 1998–2006. Market pairs connected by rail when the railway line was operational are intervention observations. Railway transport services explain a 14 to 17 percent reduction in price dispersion across markets. Geographical reach of trade varies by crop, most likely related to storability and geographical spread of production. Perishability appears to increase impact, reflecting limited scope for arbitrage. Overall, impacts are remarkably similar in size across commodities.

Suggested Citation

  • Wouter Zant, 2018. "Trains, Trade, and Transaction Costs: How Does Domestic Trade by Rail Affect Market Prices of Malawi Agricultural Commodities?," The World Bank Economic Review, World Bank, vol. 32(2), pages 334-356.
    • Handle: RePEc:oup:wbecrv:v:32:y:2018:i:2:p:334-356.
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    1. Svanidze, Miranda & Götz, Linde, 2019. "Determinants of spatial market efficiency of grain markets in Russia," Food Policy, Elsevier, vol. 89(C).
    2. Merfeld, Joshua D., 2020. "Smallholders, Market Failures, and Agricultural Production: Evidence from India," IZA Discussion Papers 13682, Institute of Labor Economics (IZA).
    3. Yali Mu & Stephan von Cramon‐Taubadel, 2022. "Estimating dynamic market efficiency frontiers," Journal of Agricultural Economics, Wiley Blackwell, vol. 73(3), pages 633-653, September.
    4. Vincent Collins Matemba & Kasonde Mundende & Inonge Milupi, 2023. "Correlates of Transport Mode Choice: Dry Commodity Movement. A Case of Malawi," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 10(11), pages 45-57, November.
    5. Wouter Zant, 2022. "Measuring Trade Cost Reductions Through a New Bridge in Mozambique: Who Benefits From Transport Infrastructure?," Journal of African Economies, Centre for the Study of African Economies, vol. 31(4), pages 384-408.
    6. Remi Jedwab & Adam Storeygard, 2019. "Economic and Political Factors in Infrastructure Investment: Evidence from Railroads and Roads in Africa 1960–2015," Economic History of Developing Regions, Taylor & Francis Journals, vol. 34(2), pages 156-208, May.
    7. Joshua D. Merfeld, 2023. "Labor elasticities, market failures, and misallocation: Evidence from Indian agriculture," Agricultural Economics, International Association of Agricultural Economists, vol. 54(5), pages 623-637, September.
    8. Vincent Collins Matemba & Kasonde Mundende & Inonge Milupi, 2023. "Investigating and Weighing the Importance of Transport Mode Choice Factors: Dry-Cargo Shipping. A Case of Malawi," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 10(10), pages 37-46, October.
    9. Ngui Min Fui Tom, 2019. "Strategy to Build a Transshipment Port as a Catalyst to Achieving Critical Mass for Sabah’s Economic Growth," International Business Research, Canadian Center of Science and Education, vol. 12(7), pages 141-166, July.
    10. Vincent Collins Matemba & Kasonde Mundende & Inonge Milupi, 2023. "Contestability between Road and Rail Transport for Dry Cargo in Malawi: Cost and Service Reliability Issues. The Never Ending Race," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 10(9), pages 335-342, September.
    11. Merfeld, Joshua, 2021. "Misallocation and Agricultural Production: Evidence from India," 2021 Conference, August 17-31, 2021, Virtual 315914, International Association of Agricultural Economists.
    12. Mangku Purnomo & Fenna Otten & Heiko Faust, 2018. "Indonesian Traditional Market Flexibility Amidst State Promoted Market Competition," Social Sciences, MDPI, vol. 7(11), pages 1-17, November.
    13. Merfeld, Joshua D., 2022. "Labor Elasticities, Market Failures, and Misallocation: Evidence from Indian Agriculture," 96th Annual Conference, April 4-6, 2022, K U Leuven, Belgium 321214, Agricultural Economics Society - AES.

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    More about this item

    Keywords

    domestic trade; crop prices; transaction costs; rail infrastructure; Malawi; sub-Sahara Africa;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • N77 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Africa; Oceania
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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