Marketplaces are an age-old way to connect geographically separated producers and consumers, and they remain widespread in rural areas of low-income countries. How do these gatherings shape development around them? This question is not easily answered, since we typically lack comprehensive market maps and localized indicators of development. To address these long-standing data gaps, I combine historical sources with novel satellite-based methods to map marketplaces and measure local population density. I focus on Kenya over the last five decades and establish three stylized facts. First, while rural population quadrupled, two thirds of weekly markets operating in 1970 no longer do so today. Second and despite many markets no longer operating, population concentrated on average around markets that were active in 1970. Third, markets further from large cities saw the most population concentration relative to their surroundings. To rationalize these findings and derive implications for policy design, I extend a model of rural-urban trade with markets as population-independent locations that aggregate otherwise sparse supply and demand and enable economies of scale in transportation. The model explains when new markets emerge, why some markets decline, and which complementary policies catalyze markets for local development.
STEG Working Paper Series
• Research Theme 0: Data, Measurement, and Conceptual Framing,
Research Theme 4: Trade and Spatial Frictions,
Cross-Cutting Issue 3: Inequality and Inclusion
Rural Marketplaces and Local Development
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