Working Paper: CEPR ID: DP16220
Authors: Rui Albuquerque; Bruno De Araujo; Luis Brando Marques; Geravsia Mosse; Pippy De Vletter; Helder Zavale
Abstract: We use data on price expectations from a survey of randomly sampled smallholder farmers in Mozambique. Across all crops, farmers report selling on average within three weeks of harvest, at lower prices than expected later in the season. Liquidity constrained farmers sell their harvest 50% faster than unconstrained farmers, but they increase their storage time in response to higher expected higher future prices. We address causality using an instrumental variables approach exploiting abnormal rainfall from cyclones Idai and Kenneth. We develop a model on market timing and its relation to price expectations and liquidity constraints.
Keywords: Liquidity Constraints; Market Timing; Household Expectations; Pricing; Storage; Developing Economies
JEL Codes: D14; D15; G51; O13; O16; Q11; Q12; Q14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Liquidity constraints (E51) | Faster sales of crops (Q13) |
| Higher expected price growth (G19) | Increased time to sell crops (Q15) |
| Liquidity constraints + Expected price growth (G19) | Selling behavior adjustment (D40) |
| Storage conditions + Liquidity constraints (G33) | Timing of sales (C41) |