Grain transport and rural credit in Mozambique: solving the space-time problem

This paper shows how credit market failures can lead to large welfare losse s in grain markets by inducing increased transport for seasonal storage in locations with low credit costs. The burden of these welfare losses falls p rimarily on rural households. These conclusions are obtained from a spatial /temporal model solved using a mixed complementarity formulation that easil y handles interest rate differentials across space. Efforts to address cred it market failures and to improve the efficiency of rural storage should be given priority as opposed to the creation of large, formal sector grain co llection centers. (C) 2001 Elsevier Science B.V. All rights reserved.