The Role of Price Information in Agricultural Markets: Evidence from Rural Peru

Abstract

Agriculture is a source of livelihood for 86% of households in rural areas, many of whom rely on their crops for income. However, many farmers in isolated areas do not have access to reliable market price information that can inform them about the most profitable opportunities on where to sell their products.

This dissertation presents new evidence on the role of price information in farmers' marketing outcomes. I use data from a field experiment in the central highlands of Peru. A group of farmers in randomly selected villages was provided with mobile phones, through which they received detailed price information for seventeen relevant crops in six regional markets. I find that those provided with the information received 13-14% higher prices for their products. This effect was larger for perishable crops and for more risk-averse households. Information also made farmers more likely to participate in commercial activities and sell their crops (rather than allocating them for self-consumption).

These results were not driven by other mobile phone benefits as the phones distributed to the farmers were restricted to only receive the price SMS during the period of the intervention. They are not driven by production decisions either because the intervention took place after planting decisions had already been made. Finally, I also investigate the possibility of information spillovers by examining marketing outcomes of households who did not receive the information but lived in villages where others did. I do not find any significant effects among households in this group.