bridge caused substantial delay in making the railway line operational again. In May 2005, close to two and a half years later, and with support from USAlD and the UK DfID, the Rivirivi railway bridge was reconstructed, and rail transport operations were resumed.<sup>10</sup> The dramatic sequence of events has created an interesting opportunity to measure the impact of rail transport services on markets. For a rigorous impact measurement, one ideally needs records of bilateral trade flows by rail, including prices by market and traded quantities of agricultural products by source and destination both before and after the disaster had taken place. Unfortunately, such data on trade by rail are not available. As a matter of fact, we also do not know to what extent trade in agricultural commodities by rail takes place in the form of passenger trade—smallholder farmers and traders travelling by train to nearby town and city markets in order to sell their produce—or in the form of formal freight.<sup>11</sup> What is available is data on market prices of agricultural commodities for a large number of markets in Malawi. Hence, in this study, we aim to measure the impact of railway services on market prices of these agricultural products.

III. MEASURING THE IMPACT OF RAILWAY SERVICES ON DISPERSION OF MARKET PRICES

# _Data_

For the empirical work, we use monthly retail market prices of agricultural commodities taken from the Agro-Economic Survey of the Ministry of Agriculture and Food Security. We have these data for a long period (from 1991/92 to 2008/09), for a large number of markets (around 70) and for a large number of agricultural commodities and livestock products (around 20). However, for the purpose of this study, we use a limited subset: we use price data of only four crops (maize, rice, groundnuts, and beans prices), for 27 markets and for the period from January 1997 to December 2007. We have selected crops that are widely produced and consumed, markets that have the most complete price data,<sup>12</sup> and a sample period that covers a distinct number of years before and after the bridge collapse. Even the selected price data are not complete, and, more troublesome, especially in the period of key interest to our research (around January 2003), a substantial drop in the completeness of the data occurs, most likely due to the food crises at the time (see supplemental appendix).<sup>13</sup> All distances used in the empirical part are distances as the crow flies, calculated using standard _Great Circle Distances,_ and based on latitude-longitude coordinates of locations (markets, railway stations). We are aware that distance measured as the crow flies differs from road distance and that road distance is the relevant concept for transport costs. However, since we do not exactly know the (changes in) road distance at the time, we rather avoid the likely but uncertain error and prefer the clear and transparent approximation of distance.

In the estimations we include the following three covariates (���,�): rainfall, population density, and per capita (gross) income. Rainfall is an annual index of crop season rainfall in mm. normalized with the long-run average crop season rainfall in mm. Rainfall is recorded in around 30 weather stations and attributed to markets on the basis of proximity. We expect that above average rainfall

> 10. Personal communication of the author with CEAR staff. In January, 2005, The Railway Gazette International (161.1, 12-14) reported: ” _Work to repair damage to the Rivirivi Bridge caused by Cyclone Delfina in January 2003 is nearing completion, and CEAR hopes to restore train services shortly._ ”

> 11. Fafchamps et al. (2005) report that, in their 2000 Malawi trader survey, none of the traders made use of transport by train. However, the impact that we are after also concerns farmers (rather than traders) who take up trading activities and sell their output in a nearby town to fetch a higher price rather than selling at the farm gate or the local market. Evidence on Ugandan coffee farmers suggests that such activities are not uncommon (see Fafchamps and Vargas-Hill [2005]). A nearby railway station may make this proposition even more profitable for a farmer.

> 12. In order to maintain the informational content of prices, we have refrained from imputing values for missings.

> 13. Malawi and Malawi agriculture suffered from floods and inundation in 2001 and from droughts in 2002, leading to a prolonged food crisis. Under these circumstances, one may expect that markets do not operate normally. Therefore, we carefully verified the number of available observations in the estimations, especially in the period from January 2003 onwards.

9