This paper presents evidence on the effects of access to domestic and international markets on per capita consumption of households using data from rural China. The econometric analysis uses alternative identification schemes to address the potential endogeneity of access to markets. We use straight-line distances to coastline and navigable river, along with the topography of the intervening counties, as sources of exogeneous variations. We also use identification through heteroskedasticity, which does not rely on standard exclusion restrictions. The results from alternative identification schemes show that better access to both domestic and international markets has positive effects on per capita consumption, the domestic market effect is significantly larger in magnitude, and there is complementarity between the access to domestic and international markets.

Governments provide public information to reduce information imperfections. Do households rely on public signals to inform themselves about market conditions? To identify the importance of public information in households' price expectations, we take advantage of a unique natural experiment in Ecuador where the published inflation rate had been different from the correct rate over a period of fourteen months due to a software error. We find that the public signal about prices plays an important role in households' price expectations, and the change in price expectations affects their savings choices. The effect is stronger for better-educated and older people.