MobileActive.org

Project ABC, implemented in collaboration with Catholic Relief Services in Niger and Christopher Ksoll (Oxford University) and Travis Lybbert (University of California-Davis), is an innovative, three-year pilot program to use cell phones as a platform for literacy in Niger. The purpose of the pilot program is to use information technology (mobile phones) as a complement to traditional literacy training, providing households with the opportunity to practice their literacy skills via SMS.

Due partly to costly information, price dispersion across markets is common in developed and
developing countries. Between 2001 and 2006, cell phone service was phased in throughout Niger, providing an alternative and cheaper search technology to grain traders and other market actors. We construct a novel theoretical model of sequential search, in which traders engage in optimal search for the maximum sales price, net transport costs. 

The model predicts that cell phones will increase traders’ reservation sales prices and the number of markets over which they search, leading to a reduction in price dispersion across markets.  To test the predictions of the theoretical model, we usea unique market and trader dataset from Niger that combines data on prices, transport costs, rainfall and grain production with cell phone access and trader behavior.  We first exploit the quasi-experimental nature of cell phone coverage to estimate the impact of the staggered introduction of information technology on market performance. 

The results provide evidence that cell phones reduce grain price dispersion across markets by a minimum of 6.4 percent and reduce intra-annual price variation by 10 percent.  Cell phones have a greater impact on price dispersion for market pairs that are farther away, and for those with lower road quality. This effect becomes larger as a higher percentage of markets have cell phone coverage.  We provide empirical evidence in support of specific mechanisms that partially explain the impact of cell phones on market performance. 

Robustness checks suggest that the results are not driven by selection on unobservables, nor are they solely a result of general equilibrium effects.  Calculations of the four-firm concentration index suggest that the grain market structure is competitive, so the observed reductions in price dispersion are not due to greater market collusion.  The primary mechanism by which cell phones affect market-level outcomes appears to be a reduction in search costs, as grain traders operating in markets with cell phone coverage search over a greater number of markets and sell in more markets.  The results suggest that cell phones improved consumer and trader welfare in Niger, perhaps averting an even worse outcome during the 2005 food crisis.

Cell phones are quickly transforming markets in low-income countries. The effect is particularly dramatic in rural areas of sub-Saharan Africa, where cell phones often represent the fi rst development in telecommunications infrastructure. The twelve million residents of Niger, a landlocked country in West Africa, had 20,000 landlines—an estimated 2 landlines per 1,000 people—when mobile phones were fi rst introduced in 2001. Now Niger has almost 400,000 cell phone subscribers. Although the country still has the lowest rate of cell phone adoption in sub-Saharan Africa, cell phone coverage has had important implications for grain markets and hence welfare in the country.