account. While this somewhat more involved approach yields rather imprecise estimates, the estimation suggests that trade costs also raise the price at which RC goods are being sold in Kinshasa.<sup>19</sup>

**Significant price differentials are also found when we consider goods imported from overseas.** Results taking account of all our sample goods, including overseas imports, are shown in columns (3) to (8) of Table 7. Several findings emerge:

- Brazzaville prices systematically appear to be higher than Kinshasa prices, across the range of regression specifications (Table 7, columns 3 to 8).

- Overseas imports are 38 to 67 percent more expensive than their domestically produced equivalents. (Table 7, columns 4 to 8). This difference is not a perfect measure of trade costs, but it is suggestive of continuing high overseas import costs, confirming estimates reported elsewhere (World Bank, 1991 and 2010c).

- There is no systematic difference in prices of RC-produced goods and their DRC-produced equivalents, on a given market. Coefficients on the binary variable _RC_good_ are never statistically significant (Table 7, columns 5 to 8).

- Average prices are equalized within cities: no individual market offers systematically higher or lower prices than any of the other sample markets. Hence, market segmentation is diagnosed only between the two capitals, not within them.<sup>20</sup>

**Overseas imports appear on average to be sold more cheaply in Brazzaville than in Kinshasa.** This is implied by negative coefficient on the interaction term given by the product of the binary variables _Brazzaville_ and _Overseas_good_ (Table 7, columns 7 and 8). On the face of it, this finding runs counter to the dominance of the Matadi-Kinshasa-Brazzaville route over the Pointe NoireBrazzaville-Kinshasa route suggested by the official data (see Section 2.2). One explanation could be that this result is too imprecise to be afforded much weight. Indeed, in one specification, the relevant coefficient is not statistically significant, and in the other specification it is borderline significant (at the 90 percent confidence level). However, in view of the high costs of crossing Malebo Pool, prices for import goods would be expected to be higher in Brazzaville than in Kinshasa if Matadi indeed were the main entry point. That we find the reverse pattern, even though somewhat imprecisely estimated, is quite remarkable and another pointer towards large undocumented imports to Brazzaville via Pointe Noire and Gabon/Cameroon, and attendant unexploited scope for transit trade to Kinshasa via Brazzaville.

**Overall, our results suggest that trade facilitation across Malebo Pool would lower prices in both cities, with particular scope for falls in import prices in Kinshasa and for falls in prices of local produce in Brazzaville.** The observed price differentials imply significant trade barriers between the two cities but not within them. Given the proximity of the two markets, this implies considerable potential for intensified arbitrage through cross-Pool trade.

> 19 Details on the random effects estimations can be obtained from the authors.

> 20 Due to space limitations, the estimations with market fixed effects are not shown in Table 7.

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