The effect of information on bargaining, corruption and trade: evidence from small agriculture traders in Kenya and Uganda

Photo Credit: Sauti Africa

Abstract 

Cross-border traders’ lack of updated information about border taxes and procedures may leave them susceptible to corruption at the hands of border agents, and little is known about these bargaining processes. The researchers introduce a free information service–which provides accurate tariff details–to evaluate the effect of improved information on bargaining, trade costs, small-scale agriculture traders’ choices of trade routes, and local prices.

Policy Issue 

Governments within member states from the East African Community (EAC) and the Common Market for East and Southern Africa (COMESA) have invested significantly in programs to facilitate and formalize trade such as One-Stop-Border-Posts, Simplified Trade Regimes (STRs) and Quality standard certification. However, not much is known about the small-scale agriculture cross-border traders who cross the border multiple times a week to source products they can sell at a higher price on the other side of the border, especially when these traders contribute to informal cross-border trade not recorded in official trade statistics. In addition, many of these traders do not have updated information about border taxes and procedures and are not aware of policies such as STRs which have been implemented to reduce high trade costs. This lack of information may leave them vulnerable to increased border-crossing costs and corruption. Can information affect the bargaining process between agriculture traders and border agents, resulting in bribes/tariffs paid, trade decisions, and/or farmers’ outcomes?

Context of the Evaluation 

This study will take place on the Kenya-Uganda border. It will focus on small-scale agriculture cross-border traders who cross the border multiple times a week to source products they can sell at a higher price on the other side of the border. Small-scale traders are more likely to use informal trade routes that large trucks would have a harder time utilizing, and thus might be more likely to be manipulated by corrupt border agents. The researchers will partner with Sauti Africa, a mobile-based trade information and social accountability platform for Small and Medium Enterprises engaged in cross-border trade in the East Africa Community (EAC), both to collect data and to provide the treatment. Sauti is a mobile-based tool for simplifying access to information on trading procedures and voicing incidents of corruption and harassment. Their platform can be accessed on any basic phone and offers multiple features. First, traders can use Sauti’s platform to find out what documentation, taxes, and tariffs are applicable to their agriculture products. For example, by simple text messages, traders key in the type of product, the quantity and value they are trading as well as the countries they plan on crossing. They will receive immediate text information about the correct tariff to be paid at the border. Second, through an anonymous reporting mechanism, they crowd-source data to map incidents of harassment and corruption at border crossings across East Africa.

Details of the Intervention 

Researchers will conduct a randomized evaluation to test the impact of free access to the Sauti information platform on the bargaining process between agriculture traders and border agents, resulting bribes/tariffs paid, trade decisions, and downstream farmers’ outcomes.
The researchers will collect continuous data over time for 1000 traders, 500 of which will make up the “treatment” group, using daily survey text messages as well as traditional surveys. This continuous data collection will create a new, unique dataset on trading behaviors, bargaining, and bribes paid for the same agricultural traders over time. The researchers will identify the impact of information given to the agriculture trader on outcomes such as bargaining, bribe amounts, and agriculture product traded. In addition, the research team will send surveyors to act like traders in order to record data on tariffs and bribes requested to be paid as well as details on how the bargaining unfolded.

Results and Policy Implications 

Evaluation ongoing, results forthcoming.