How much millet can a cellphone buy?

In Niger, mobile phones can keep a family fed during a food crisis. In the U.S. we can't be bothered even to throw them away.


Andrew Leonard
February 21, 2008 2:48AM (UTC)

How the World Works loves data points about cellphones:

1) The market research intelligence firm iSuppli reports that in the fourth quarter of 2007, only 9.4 percent of Americans who purchased new cellphones recycled their old ones. By far the most common destination for the unloved and obsolete phones: the closet. 36.8 percent of the old handsets get stored away, presumably out of sight, out of mind.

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This is too bad, because there is undoubtedly a market for those old cellphones somewhere else on the globe, where they could be, oh, saving people from starvation.

Which brings us to 2), a paper by U.C. Berkeley economics Ph.D. candidate Jenny Aker, "Does Digital Divide or Provide? The Impact of Cell Phones on Grain Markets in Niger." This 61-page study is not for the weak-of-math, but is the most rigorous investigation I've seen so far conducted into the thesis that cellphone penetration improves the welfare of poor people in developing countries. (Thanks to the Center for Global Development for the link. )

Make no mistake: Niger is one of the very poorest countries in the world. It also "has the second lowest landline coverage in the world, with only 2 landlines available per 1000 people," writes Aker. But cellphone coverage began rolling out in 2001, and by 2006, some 29 percent of the country's grain traders owned cellphones.

Aker's research provides "evidence that cellphones reduce grain price dispersion across markets by a minimum of 6.4 percent and reduce intra-annual price variation by 10 percent." In other words, access to cellphones smooths out the highs and lows, allowing traders to get the best price for their wares, whether that mean buying low, or selling high. Aker suggests that the data show that during a severe food crisis in 2005, regions with cellphone coverage did better than regions without.

We find that grain traders operating in markets with cellphone coverage search over a greater number of markets, have more contacts and sell in more markets. This underscores the fact that the primary mechanism by which cellphones affect market efficiency is a reduction in search costs and hence transaction costs.

While we lack the necessary data to conduct full welfare estimates, the presence of cellphones is associated with 3.5 percent reduction in consumer grain prices between 2001-2006, and a 4 percent reduction in prices during the year of the food crisis. The lower relative prices in cellphone markets could have allowed individuals to consume millet for additional 8-12 days. Cellphone towers are associated with an increase in trader welfare as well, with traders in cellphone markets receiving higher sales prices and annual profits.

Eight to 12 additional days of millet may not seem like much, but in Niger it probably means quite a bit. So, let's find a way to recycle those moldering cellphones.


Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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