Erwin Bulte, Jérémy Do Nascimento Miguel, Banawe Plambou Anissa
{"title":"Competition on Agricultural Markets and Quality of Smallholder Supply: The Role of Relational Contracting and Input Provision by Traders","authors":"Erwin Bulte, Jérémy Do Nascimento Miguel, Banawe Plambou Anissa","doi":"10.1086/721024","DOIUrl":null,"url":null,"abstract":"We analyze how market power by traders on local agricultural spot markets affects investment in crop quality by smallholders in a context with “imperfect institutions”—without third-party contract enforcement and with incomplete input markets. Farmers and traders can engage in relational contracting where the promise of future rents supports current cooperation. We analyze informal contracting under the shadow of side selling by the farmer and ask how changes in the competitiveness of local markets affect flows of inputs in relational contracts. When local markets become more competitive, fewer farmers are included in relational contracting with traders, and farmers who remain in such relationships receive less support from traders. We document empirical evidence from local wheat markets in Ethiopia that is consistent with the theory.","PeriodicalId":48055,"journal":{"name":"Economic Development and Cultural Change","volume":null,"pages":null},"PeriodicalIF":2.0000,"publicationDate":"2024-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Economic Development and Cultural Change","FirstCategoryId":"96","ListUrlMain":"https://doi.org/10.1086/721024","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"AREA STUDIES","Score":null,"Total":0}
引用次数: 0
Abstract
We analyze how market power by traders on local agricultural spot markets affects investment in crop quality by smallholders in a context with “imperfect institutions”—without third-party contract enforcement and with incomplete input markets. Farmers and traders can engage in relational contracting where the promise of future rents supports current cooperation. We analyze informal contracting under the shadow of side selling by the farmer and ask how changes in the competitiveness of local markets affect flows of inputs in relational contracts. When local markets become more competitive, fewer farmers are included in relational contracting with traders, and farmers who remain in such relationships receive less support from traders. We document empirical evidence from local wheat markets in Ethiopia that is consistent with the theory.
期刊介绍:
Economic Development and Cultural Change (EDCC) is an economic journal publishing studies that use modern theoretical and empirical approaches to examine both the determinants and the effects of various dimensions of economic development and cultural change. EDCC’s focus is on empirical papers with analytic underpinnings, concentrating on micro-level evidence, that use appropriate data to test theoretical models and explore policy impacts related to a broad range of topics relevant to economic development.