Is IT Access Enough? Evidence from a Natural Experiment in India’s Agriculture Markets

This paper examines whether providing regular, reliable and unbiased price information via text messages to interested parties results in price dispersion reductions, over and above the effect observed with access to mobile phones. India’s wholesale agriculture markets provide a fertile environment to empirically test this hypothesis. In October 2007, Thomson Reuters introduced Reuters Market Light (RML), a paid subscription service providing crop related information to market participants via daily text messages. Using a natural experiment where bulk text messages were unexpectedly banned for twelve days, this paper measures the effect of the service provided by RML on geographic price dispersion. We observe a statistically and economically significant 7.6% increase in price dispersion during the text message ban. When the RML price information service is restored, price dispersion returns to pre-ban levels. Price dispersion increases during the ban are largest in areas where RML has the largest number of subscribers. Our research provides evidence that fair and unbiased information can be beneficial in creating more efficient agriculture markets. Furthermore, we find that crops with high and medium levels of perishability benefit from the RML price information, while non-perishable crops do not. Our results help information providers understand where their services provide the greatest gains. International aid organizations can use the results to better decide how to allocate funds aimed at improving welfare in developing countries.