The Impact of Cell Phones on Grain Markets in Africa’s Niger
Monday, February 25, 2008
A new research study by Jenny Aker, an independent PhD candidate at the University of California-Berkeley has looked at the impact of mobile phones on the prices of farm produce in the African country of Niger – which faced serious food shortages in 2005. In theory, the increasing use of mobile phones should have improved distribution efficiency and hence lower the variations in prices around the country. The study set out to see if that was the case.
With an estimated 85 percent of the population living on less than US$2 per day, Niger is the lowest-ranked country according to the United Nations’ Human Development Index. The majority of the population consists of rural subsistence farmers, who depend upon rainfed agriculture as their main source of income. Grains (primarily millet and sorghum) are dietary staples, accounting for over 75 percent of food consumption. These commodities are transported from farmers to consumers through an extensive system of markets that run the length of the country, which is roughly three times the size of California.
As grain markets occur only once per week, traders have historically traveled long distances to potential sales markets to obtain information on supply, demand and prices. Between 2001 and 2006 though, cell phone service was phased in throughout Niger, providing an alternative and cheaper search technology to grain traders and other market actors.
To test the predictions of the theoretical model, the researchers use a 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. They first exploited the quasi-experimental nature of cell phone coverage to estimate the impact of the staggered introduction of information technology on market performance.