<u>Table 3: Border coefficients, distance and price stickiness, average effect in the region.</u>

||All|products (Ma|ize-Rice-Sorgh|um)|Maize|Rice|Sorghum|
|---|---|---|---|---|---|---|---|
||(1)<br>|ln(Pikt/Pjkt)||(2)<br>|ln(Pikt/Pjkt)||(3)<br>|ln(Pikt/Pjkt)||(4)<br>|ln(Pikt/Pjkt)||(5)<br>|ln(Pikt/Pjkt)||(6)<br>|ln(Pikt/Pjkt)||(7)<br>|ln(Pikt/Pjkt)||
|lnRoad_Length|0.0571***|0.0618***|0.0352***|0.0354***|0.0236***|0.0600***|0.0175***|
||(0.00472)|(0.00607)|(0.00516)|(0.00518)|(0.00760)|(0.00821)|(0.00489)|
|Road_quality||-0.0407***|-0.0260**|-0.0264**|-0.00247|-0.0527***|-0.0147|
|||(0.0140)|(0.0131)|(0.0131)|(0.0255)|(0.0182)|(0.0155)|
|border|||0.0742***|0.0723***|0.0546***|0.126***|0.0298***|
||||(0.00576)|(0.00534)|(0.0113)|(0.00729)|(0.00875)|
|ln<br>_ijt_<br>_ER_<br>∆||||0.114<br>(0.0696)||||
|Constant|0.0820|0.109|0.247**|0.248**|0.213**|-0.283***|0.350***|
||(0.0877)|(0.0898)|(0.102)|(0.102)|(0.0870)|(0.0584)|(0.0452)|
|Town-Product<br>dummies|Yes|Yes|Yes|Yes|No|No|No|
|Month-Product<br>fixed effects|Yes|Yes|Yes|Yes|No|No|No|
|Town dummies|No|No|No|No|Yes|Yes|Yes|
|Month fixed<br>effects|No|No|No|No|Yes|Yes|Yes|
|Observations|68,821|68,821|68,821|68,821|25,468|26,280|17,073|
|R-squared<br>Note:Robust sta|0.473<br>ndard errors in|0.474<br>parentheses|0.483<br>are clustered b|0.483<br>y city-pair. Sig|0.496<br>nificance level|0.444<br>s are: *** p<0|0.452<br>.01, **|

<u>Note: Robust standard errors in parentheses are clustered by city-pair. Significance levels are: *** p<0.01, **</u> p<0.05, * p<0.1. In columns (1)-(4), regressions include 314 interaction terms for town-product dummies (‘Ngozi x Maize’ being dropped) and 48 interaction terms for month-product dummies (‘May2008 x Maize’, ‘May2008 x Rice’ and ‘May2008 x Sorghum’ are dropped). In columns (5)-(7), regressions include only town and month dummies because the regression are by product. The coefficients on the border dummy in this table have to be interpreted with respect to the average price correlation within-countries in the sample (the omitted dummy).

Road quality plays also a significant role on market integration. Ceteris paribus, city pairs with 65% of road paved (the first quartile of the sample) have a higher relative price difference of 1.2% compared to city pairs where 94% (the median of the sample) of road joining them is paved. In other words, ceteris paribus, if road quality between Rwanda and DRC (35.7%) increased to the level of road quality between Tanzania and Malawi (95.5%), the relative prices would be lower by 2.5%, and therefore market integration would be slightly higher. This is in line with the intuition of Teravaninthon and Raballand (2009) who argue that poor roads increase transport costs by increasing fuel consumption, increasing maintenance costs, accelerating depreciation of vehicles and therefore increasing replacement costs and raising journey times due to lower speeds (opportunity costs).

Yet, the effect of road quality is low compared to the effect of distance. In columns (5) to (7) of this table, only the relative prices of rice are significantly impacted by the road quality but, controlling for town-month fixed effects in table A.12, price differences of all products are 14