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Restricting Trade and Reducing Variety: Evidence from Ethiopia

Author

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  • Pramila Krishnan
  • Peng Zhang
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.

Suggested Citation

  • Pramila Krishnan & Peng Zhang, 2018. "Restricting Trade and Reducing Variety: Evidence from Ethiopia," CSAE Working Paper Series 2018-15, Centre for the Study of African Economies, University of Oxford.
    • Handle: RePEc:csa:wpaper:2018-15
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    References listed on IDEAS

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    Cited by:

    1. Mayneris, Florian & Martin, Julien & Theophile, Ewane, 2020. "The price of remoteness: Product availability and local cost of living in Ethiopia," CEPR Discussion Papers 14515, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    Variety; Transport costs;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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