Information Technology and Rural Market Performance in Central India

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How do improvements in information impact market performance? This dissertation examines the effect of an innovative initiative launched by a private company in the central Indian state of Madhya Pradesh. Beginning in October 2000, it set up 1700 internet kiosks and 45 warehouses that provide wholesale price information and an alternative marketing channel to soybean farmers in the state. I develop a theoretical model of this intervention and estimate the impact using a new market-level dataset with spatial geo-coded information. The causal effect is isolated by exploiting the variation in the timing of the introduction of kiosks and warehouses across districts of the state. The estimates suggest an immediate and significant increase in the monthly wholesale market price of soybeans after the introduction of kiosks, lending support to the predictions of the theoretical model. While the presence of warehouses appears to have no effect on price, warehouses are associated with a dramatic reduction in the volume of sales in the traditional markets. Moreover, there is a significant increase in the area under soy cultivation. The estimates are robust to disaggregated measures of treatment and comparisons with alternative crops grown in the same season as soy. The analysis suggests that information can substantially enhance the functioning of rural markets by increasing the competitiveness of buyers.