There is little evidence on the impacts of rural road infrastructure investments in developing economies. This paper contributes to this literature in two ways. First, using a road-level regression discontinuity identification strategy based on the specific design of a rural road rehabilitation program in Sierra Leone, we study the impacts of rural road infrastructure improvements on prices. We show that the improved roads led to a reduction in local crop prices in markets. We find that this effect is stronger in markets that are more distant from major urban centers and in those located in less productive areas. Second, we theoretically derive equilibrium prices in agricultural markets under alternative structures of trader competition. We show that our empirical findings are consistent with a search cost framework a la Mortensen, but inconsistent with other models, such as Bertrand competition, bilateral bargaining, and Cournot oligopsony.
Casaburi, L.; Glennerster, R.; Tavneet Suri. Rural Roads and Intermediated Trade: Regression Discontinuity Evidence from Sierra Leone (IGC Working Paper). International Growth Centre (IGC), London, UK (2012) 51 pp.