This paper formalizes and demonstrates how transport infrastructure between rural areas helps Third World countries deal with crop failures. In developed economies where transport costs are negligible, a crop failure in one area enhances market opportunities for producers in other growing regions. In developing countries where transport costs can be prohibitive, a crop failure in one area can have the reverse effects on other growing regions—undermining market opportunities—especially where crops must be transported through a central market to which food aid is delivered. We analyze the impacts of crop failures and food aid in a Walrasian general equilibrium model of a small, open, three-region economy, stylized to mimic African countries with prohibitively high costs of transport between rural regions.
The Annals of Regional Science, vol. 49, n. 2, 2012, pp. 373–396