Lauren F. Bergquist
Becker Friedman Institute
1126 E. 59th Street
Chicago, IL 60637
NBER Working Papers and Publications
|April 2018||Sell Low and Buy High: Arbitrage and Local Price Effects in Kenyan Markets|
with Marshall Burke, Edward Miguel: w24476
Large and regular seasonal price fluctuations in local grain markets appear to offer African farmers substantial inter-temporal 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 inter-temporally. 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 28%. To understand general equilibrium 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...