revenues, and almost 100 percent of exports.<sup>3</sup> In rural areas, subsistence agriculture constitutes the largest part of production. However, food production was insufficient even before the onset of the conflict. Only the Greenbelt area of Western Equatoria has excessive food production; while all other states are food deficient.<sup>4</sup> The patchy trade data and recent evidence in Calì and Varela (2013) suggest that the food deficit in most parts of the country is filled by imports (mainly from Uganda and Sudan) and to a limited extent by domestic trade.

However relying on markets for consumption is both costly and perilous in South Sudan. The very poor transport infrastructure in large parts of the country – especially in northern states – creates significant transportation costs leading to considerable price variations across the country. In addition the violence, within South Sudan and sporadically with Sudan, has greatly undermined the security of trade and thus increased price volatility.

We estimate the degree of integration in seven food markets, and two energy markets across eight state capitals.<sup>5</sup> The former group includes sorghum, maize, millet, wheat flour, sesame, broad beans and groundnuts; the latter group includes diesel and gasoline. The choice of products reflects the combination of its importance in the consumption basket of South Sudanese and of data availability. The period analyzed spans 2009-2013, with exceptions again due to data availability.<sup>6</sup> The analysis reveals four main messages.

First, markets in South Sudan are highly segmented. Price differences for narrowly defined products, across cities exceed in certain instances 100 percent. For sorghum, for example, a key staple in South Sudan, inter-city prices differences are on average, 43 percent. These differences within South Sudan exceed those reported in the literature for inter-countries price gaps in Central and Western Africa (Brenton et al., 2015).

Second, price volatility has increased substantially since the imposition of the trade restrictions with Sudan. Groundnuts and sorghum, for example, show the most geographically widespread increase in price volatility when comparing the pre- and the post-border closure periods. These increases in price volatility tend to hurt disproportionately the poor, who cannot smooth purchasing decisions over time due to liquidity constraints.

Third, trade restrictions associated with the Sudan border closure in mid-2011 have increased market segmentation, particularly for cities in northern states. The border closure increased price differences in northern states by about 6 percent, on average. And this segmentation does not include that induced by other restrictions to trade within the country, chiefly the formal and informal tolls charged in checkpoints throughout the country to users of the road network.

Fourth, transportation costs explain up to 33 percent of the variation of food price differences across South Sudan. In particular increasing the portion of primary roads by 10 percentage points

> 3 See World Bank (2014) “Trade, Poverty, and Economic Diversification in South Sudan”, PREM Africa Region, World Bank, mimeo.

> 4 The ‘greenbelt’ comprises the states of Western Equatoria, Central Equatoria and portions of Eastern Equatoria, and it is so named because of the usual rainfall, beginning in March and ending in October. The soils there are generally productive, ranging from coarse-textured sands to loamy clays. See World Bank (2012) “Agricultural Potential, Rural Roads and Farm Competitiveness in South Sudan, Report No. 68399-SS.

> 5 The major towns with available data considered are Aweil, Bentiu, Bor, Kajok, Juba, Malakal, Rumbek, and Wau. 6 For Sorghum, for example, data for Malakal and Wau are available since 2006 and 2007 respectively. For Sesame, most data are available since 2010. For diesel and gasoline, data are available only since 2012.

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