Lauren Falcao Bergquist Publications

We study the large-scale experimental rollout of a platform that reduced search and matchingfrictions in Ugandan agricultural markets by connecting buyers and sellers. Market integrationimproved substantially: trade increased and price gaps fell. Interpreting the experiment througha trade model, we estimate treatment effects accounting for equilibrium changes that impactcontrol markets. The intervention reduced fixed trade costs by 20% and increased trade flowsbetween treated markets by 7% and across all markets by 1%. Scale economies shaped engagement:few farmers used the platform, but equilibrium price convergence from improved arbitrage bylarger traders passed through to farm revenue.

This chapter takes stock of what has been learned from the recent micro-development literature about wedges—mechanisms generating dispersion in marginal revenue products of factors across firms, which are commonly interpreted as indicators of misallocation. We present a general theoretical framework that allows us to consider several different types of wedges simultaneously. We argue that it is important to distinguish between between technological wedges, which are present even in the efficient allocation that would be chosen by the social planner, and distortionary wedges, which are present in market equilibrium but not the social planner's allocation. Not all wedges, as we have defined them, are distortionary. We also argue that interactions among wedges are pervasive. We review empirical findings about different types of wedges—taxes, regulations, political connections, corruption, market power, contracting frictions, upgrading investments, and search—focusing on studies that present direct evidence on particular wedges and how they generate dispersion in marginal returns to factors. Throughout, we pay special attention to how wedges vary with firm size and whether the evidence supports the “large firms are constrained” view of development. We conclude with thoughts about promising directions for the misallocation literature.

Access to microcredit has been shown to generate only modest average benefits for recipient households. We study whether other financial market frictions – in particular, lack of access to a safe place to save – might limit credit’s benefits. Working with Kenyan farmers, we cross-randomize access to a simple savings product with a harvest-time loan. Among loan offer recipients, the additional offer of a savings lockbox increased farm investment by 11% and household consumption by 7%. Results suggest that financial market frictions can interact in important ways and that multifaceted financial access programs might unlock dynamic household gains.

African agricultural markets are characterized by low farmer revenues and high consumer food prices. Many have worried that this wedge is partially driven by imperfect competition among intermediaries. This paper provides experimental evidence from Kenya on intermediary market structure. Randomized cost shocks and demand subsidies are used to identify a structural model of market competition. Estimates reveal that traders act consistently with joint profit maximization and earn median markups of 39 percent. Exogenously induced firm entry has negligible effects on prices, and low take-up of subsidized entry offers implies large fixed costs. We estimate that traders capture 82 percent of total surplus.

Large and regular seasonal price fluctuations in local grain markets appear to offer African farmers substantial intertemporal arbitrage opportunities, but these opportunities remain largely unexploited. Small-scale farmers are commonly observed to “sell low and buy high,” rather than the reverse. In a field experiment in Kenya, we show that credit market imperfections limit farmers’ abilities to move grain intertemporally. Providing timely access to credit allows farmers to buy at lower prices and sell at higher prices, increasing farm revenues and generating a return on investment of 29%. To understand general equilibrium (GE) effects of these changes in behavior, we vary the density of loan offers across locations. We document significant effects of the credit intervention on seasonal price fluctuations in local grain markets, and show that these GE effects shape individual-level profitability estimates. In contrast to existing experimental work, the results indicate a setting in which microcredit can improve firm profitability, and suggest that GE effects can substantially shape microcredit’s effectiveness. In particular, failure to consider these GE effects could lead to underestimates of the social welfare benefits of microcredit interventions.