with like.<sup>16</sup> We always include a binary control variable for prices collected from wholesalers, as they are not directly comparable to the prices collected from retail vendors.

**Our analysis of prices in Kinshasa and Brazzaville retail markets points towards the existence of significant trade barriers.** Imports from across Malebo Pool are consistently estimated to be more expensive than corresponding local products. Our most precisely measured differential, estimated over DRC exports to RC, is 20 percent. The detailed estimation results are shown in Table 7.

**Price differences cannot be attributed to differences in local producer and distribution costs.** This can be ascertained by comparing the prices of staple goods produced and sold locally on either side of the river without being traded across the border.<sup>17</sup> If we were to observe a significant price difference for such goods, this would point to differences in economic conditions (systematically different producer and/or local distribution costs) combined with barriers to cross-river arbitrage. We therefore regress the log of observed prices of locally produced and locally sold goods on the binary variable _Brazzaville_ , which is set to one for prices collected in Brazzaville and to zero for prices collected in Kinshasa, plus a fixed effect for each good and a binary variable that is set to one if the price in question is recorded from a wholesaler. The estimated regression coefficient shown in column (1) of Table 7 suggests that prices for the same locally produced good on average are 13 percent higher in Brazzaville than in Kinshasa. Importantly, however, this effect is not statistically significant, i.e. we cannot reject the hypothesis that this difference falls within the margins of random price variations among vendors and that prices are in fact equalized across the two cities. Hence, our data do not suggest there to be a systematic discrepancy in retail prices for local produce in Brazzaville and Kinshasa, implying that the underlying economic structures are very similar.

**Shipping local goods the 3.5 kilometers across Malebo Pool from Kinshasa to Brazzaville is found to add more than a fifth to the retail price of these goods.** This can be seen by considering only locally produced goods but including also products that are exported across the river. Since our sample of prices includes no goods that are produced in RC and sold in both Brazzaville and Kinshasa, we focus on goods produced in DRC and sold in both cities. Our sample includes ten such products.<sup>18</sup> The estimates shown in column (2) of Table 7 provide evidence of market segmentation: DRC-produced goods are sold at a 20 percent premium in Brazzaville relative to their retail price in Kinshasa. This estimate is highly statistically significant and thus provides evidence of substantial trade barriers between the two cities.

**At the same time, shipping goods from Brazzaville to Kinshasa also raises their prices.** Again, our data sample contains no goods that are produced in RC and sold in both Brazzaville and Kinshasa, and therefore does not allow us to estimate the margin at which RC-produced goods are sold in Kinshasa via fixed effects. We therefore focus on products whose prices are expressed relative to their weight (i.e. per kilogram) and employ random effects estimation that take also differences between goods into

> 16 In order to allow us to interpret estimated regression coefficients as percentage differences, we transform prices (the dependent variable) into their natural logarithms. Thereby, any coefficient on a binary explanatory variable, _D_est_ , is related to the implied percentage difference, _D_%_ , through the following function _D_%_ = 100 * ( _e_<sup>_D_est_</sup> – 1).

> 17 Our sample goods that are produced and consumed locally on both sides of the river are cassava flour, cement, eggs, green beans, mineral water, palm oil, plantain, potato, sugar cane, sweet potato, tomato and wheat flour.

> 18 These products are body lotion, butter, cement, cooking oil, mineral water, palm oil, plastic chairs, sugar cane, washing powder and wheat flour. Four of these goods also appear on the list of locally-produced-and-locally-sold products (cement, mineral water, palm oil, sugar cane, wheat flour). This is possible because the Brazzaville price data distinguish between locally produced varieties and imported varieties. Hence, for instance, separate prices are recorded for cement produced in Loutete (RC) and cement imported from Lukala (DRC).

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