This paper examines the effects of market integration on household consumption using data on seven food and two energy markets across South Sudan. The analysis reveals that markets in South Sudan are highly segmented. Price differences for narrowly defined products, across cities exceed in some cases 100 percent. In addition, price volatility increased substantially following the imposition of the trade restrictions with Sudan. This increase tends to hurt disproportionately the poor, who cannot smooth purchasing decisions over time because of liquidity constraints. Transportation costs explain almost half of the variation in food prices across space, and improving the quality of roads has a large potential to reduce prices in the most expensive towns. On the basis of this price effect, the simulations suggest that bringing all road quality across states to that of primary roads can yield a reduction in poverty from the rate of 51.7 percent in 2009 to between 42.8 and 46.9 percent. These estimates have to be interpreted as conservative, as they do not take into account the second-order effects of road construction from increased trade that will result from better road connectivity.
Trade Economist at The World Bank
Gonzalo Varela is a trade economist in the World Bank Group Trade and Competitiveness Global Practice. He has more than seven years experience working with the public and private sectors in Latin America and the Caribbean, North Africa, and East Asia on issues of trade and productivity, exchange rate uncertainty, firm dynamics, and regional integration. Prior to joining the World Bank Group, Gonzalo lectured at the University of Sussex, University of Pisa and Scuola Sant'Anna, and worked for the Ministry of Industry in Uruguay. He holds a PhD in Economics from the University of Sussex, and a Master's in International Economics from the same institution.