Working Paper: NBER ID: w25253
Authors: Shilpa Aggarwal; Brian Giera; Dahyeon Jeong; Jonathan Robinson; Alan Spearot
Abstract: In this paper, we quantify market access in rural Tanzania, and the extent to which it constrains agricultural productivity. We collect granular data on farmer input and sales decisions, input and output prices, and travel costs in all 1,183 villages in two regions of Tanzania. We find that a village in the 90th percentile of the travel-cost adjusted price distribution faces input and output prices 40-55% less favorable than a village at the 10th percentile. In reduced form, an additional standard deviation of travel time is associated with 20-25% lower input adoption and output sales. We develop and quantify a spatial model of input adoption and conservatively estimate that farmers behave as if they face travel costs of 6% ad-valorem per kilometer of travel, which is equivalent to 40% when traveling to the closest retailer. Holding exogenous local factors fixed, we estimate that reducing travel costs by 50% (approximately the effect of paving rural roads) doubles adoption and reduces the adoption-remoteness gradient by 18%.
Keywords: Market Access; Trade Costs; Technology Adoption; Agricultural Productivity
JEL Codes: F14; O12; O13; O18; Q12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Travel costs (R41) | Probability of using fertilizer (Q16) |
| Travel costs (R41) | Probability of selling maize (C29) |
| Travel time (R41) | Input adoption (Y20) |
| Travel time (R41) | Output sales (L81) |
| Market access (L17) | Input prices (P22) |
| Market access (L17) | Output prices (P22) |
| Reducing travel costs by 50% (R48) | Adoption rates (J13) |
| Reducing travel costs by 50% (R48) | Remoteness-adoption gradient (J62) |