Transport Costs and Food Price Volatility in Africa

We analyze the role of market remoteness on maize price volatility in a developing country, Burkina Faso. A trade model between a rural area and an urban area is used to show that transport costs increase volatility in rural markets when this volatility is due to local supply or demand shocks in the rural area. We provide empirical support to this proposition by exploring a dataset of monthly maize price series across 28 markets over the 2004–2014 period in Burkina Faso. Travel time, kilometric distance and road pavement are used as proxies for transport costs. We estimate an autoregressive conditional heteroskedasticity model to investigate the statistical effect of these proxies on maize price volatility. We find a robust and positive effect of transport costs on maize price volatility. Our findings suggest that enhancing road infrastructure in landlocked countries would strengthen the link between rural and urban markets, thereby smoothing grain price volatility. (Resume d'auteur)