Timothée Demont : timothee.demont[at]univ-amu.fr
Lorenzo Rotunno : lorenzo.rotunno[at]univ-amu.fr
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, as well as simulating the impact that the intervention would have had if it were universally implemented. Our results suggest that the intervention reduced fixed trade costs by 10% and increased overall welfare in the study area by 1%. 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.