Research

Publications

Sell Low and Buy High: Arbitrage and Local Price Effects in Kenyan Markets (with Marshall Burke and Edward Miguel)

Quarterly Journal of Economics, vol. 134, no. 2, 785–842, May 2019

Large and regular seasonal price fluctuations in local grain markets appear to offer African farmers substantial inter-temporal arbitrage opportunities, but these opportunities remain largely unexploited: small-scale farmers are commonly observed to "sell low and buy high" rather than the reverse. In a field experiment in Kenya, we show that credit market imperfections limit farmers' abilities to move grain inter-temporally. Providing timely access to credit allows farmers to buy at lower prices and sell at higher prices, increasing farm revenues and generating a return on investment of 25%. To understand general equilibrium effects of these changes in behavior, we vary the density of loan offers across locations. We document significant effects of the credit intervention on seasonal price fluctuations in local grain markets, and show that these GE effects shape individual level profitability estimates. In contrast to existing experimental work, the results indicate a setting in which microcredit can improve firm profitability, and suggest that GE effects can substantially shape microcredit's effectiveness. In particular, failure to consider these GE effects could lead to underestimates of the social welfare benefits of microcredit interventions.

Competition and Entry in Agricultural Markets: Experimental Evidence from Kenya (with Michael Dinerstein)

American Economic Review, vol. 110, no. 12, 3705-3747, December 2020. [Lead Article]

African agricultural markets are characterized by low farmer revenues and high consumer food prices. Many have worried that this wedge is partially driven by imperfect competition among intermediaries. This paper provides experimental evidence from Kenya on intermediary market structure. Randomized cost shocks and demand subsidies are used to identify a structural model of market competition. Estimates reveal that traders act consistently with joint profit maximization and earn median markups of 39%. Exogenously-induced firm entry has negligible effects on prices, and low take- up of subsidized entry offers implies large fixed costs. We estimate that traders capture 82% of total surplus.

Unlocking the Benefits of Credit through Saving  (with Sanghamitra Mukherjee, Marshall Burke, and Edward Miguel) 

Journal of Development Economics, vol. 171, October 2024

Access to microcredit has been shown to generate only modest average benefits for recipient households. We study whether other financial market frictions – in particular, lack of access to a safe place to save – might limit credit’s benefits. Working with Kenyan farmers, we cross-randomize access to a simple savings product with a harvest-time loan. Among farmers offered a loan, the additional offer of a savings lockbox increased farm investment by 11% and household consumption by 7%. Results suggest that financial market frictions can interact in important ways and that multifaceted financial access programs might unlock dynamic household gains

Working Papers

Scaling Up Agricultural Policy Interventions: Theory and Evidence from Uganda (with Benjamin Faber, Thibault Fally, Matthias Hoelzlein, Edward Miguel, and Andres Rodriguez-Clare)

Revise & Resubmit at Econometrica

[NBER Working Paper] [VoxEU] [VoxDev]

We propose a new approach for quantifying large-scale agricultural policy counterfactuals that can both complement and be informed by evidence from field and quasi-experiments. We develop a quantitative model of agricultural trade that captures important, but typically neglected features of this setting, including additive trade costs and homogeneous goods. We propose a new solution method in this environment that relies on rich but widely available microdata. We harness field and quasi-experiments for parameter estimation, and showcase our approach in the context of input subsidies in Uganda. We find that the average welfare gain from treatment falls by 20% when implemented at scale. At the same time, the effect increases among the poorest households as the gains shift from land onto labor, reducing the regressivity of the local intervention by more than half. We explore how these forces depend on the geographical scale of implementation, with implications for randomized saturation designs.

Search Costs, Intermediation, and Trade: Experimental Evidence from Ugandan Agricultural Markets  (with Craig McIntosh and Meredith Startz) 

Search costs may be a barrier to market integration in developing countries, harming both producers and consumers. We present evidence from the large-scale experimental rollout of a mobile phone-based marketplace intended to reduce buyer-seller search and matching costs for agricultural commodities in Uganda. We find that market integration improves substantially: trade increases and price dispersion falls. This reflects price convergence across relative surplus and deficit markets, with no change in average prices. Interpreting our experimental variation through the lens of a trade model, we correct our reduced form estimates to account for equilibrium effects on control markets via trade connections. Our results suggest that the intervention reduced fixed trade costs between treated markets by 28% and increased average trade flows across all markets by 2%. Contrary to the stated goals of the marketplace, but consistent with the existence of economies of scale in search or other trade costs, almost all activity on the platform is among larger traders, with very little use by smallholder farmers. Nevertheless, the benefits of improved arbitrage by traders appears to pass through to farmers in the form of higher revenues in surplus markets, as trader entry increases and measured trader profits decrease in response to falling search costs.

Work in Progress


Quality Upgrading and Market Structure (with Jie Bai, Ameet Morjaria, Russell Morton, and Yulu Tang)


Financial Constraints to Exporting: Experimental Evidence from Rwanda’s Export Growth Fund (with Jie Bai, Christian Lippitsch, and Ignacio Marra de Artiñano)


Search Costs and Firm-to-Firm Linkages: Experimental Evidence from Trade Fairs (with Jie Bai, Federico Huneeus, Nicolas Jimenez, and Yuhei Miyauchi)


Information Constraints in Domestic Supply Chain Linkages (with Jie Bai, Vittorio Bassi, Christian Lippitsch, and Ignacio Marra de Artiñan)


Quality, Contracting, and Competition in Developing Country Supply Chains (with Meredith Startz)