Restricting Trade and Reducing Variety: Evidence from Ethiopia

Pramila Krishnan and Peng Zhang

No 2018-15, CSAE Working Paper Series from Centre for the Study of African Economies, University of Oxford

Abstract: The study of consumption in poor households usually focuses on the costs of the consumption basket rather than its composition. In contrast, we investigate the variety in consumption using data from rural Ethiopia. We examine the loss in variety in remote locations, relying on a purpose-designed longitudinal survey over two years, where villages differ only in distance to the market and are homogenous otherwise. In addition, we exploit a change in policy which resulted in a crackdown on informal or unlicensed traders in the second year but which affected only the more remote set of villages and resulted in a fall in availability in these villages. We examine the welfare impact of the crackdown on traders by calculating the compensating and equivalent variation and find a fall in welfare between 11% and 13% of incomes for households affected by the crackdown, mostly driven by the resultant fall in varieties available. The welfare costs of remoteness are driven by not just the fall in consumption but also the fall in variety in consumption.

Keywords: Variety; Transport costs (search for similar items in EconPapers)
JEL-codes: D04 D12 O12 O18 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-dev
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Related works:
Journal Article: Restricting trade and reducing variety: Evidence from Ethiopia (2020)
Working Paper: Restricting Trade and Reducing Variety: Evidence from Ethiopia (2018)
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