Effects of public and private regulations on wholesale vendors' adoption of agrifood traceability to farms

Abstract

Agrifood traceability of farms is extremely difficult owing to the small scale and dispersibility of farms. Fortunately, wholesale markets play an irreplaceable role in agrifood systems and in upstream traceability in many developing countries. This study first explores the mechanism of food safety liabilities related to the adoption of upstream traceability to farms. Then, the effects of public regulation by the government and private regulation by the market platform on wholesale vendors' adoption of traceability are investigated empirically. A unique panel dataset comprising 9287 food safety tests for 396 vendors from a wholesale market is used in the empirical analysis. The results show that vendors behave opportunistically by lowering their level of traceability when they expect a smaller possibility of being sampled. Given the same strength of regulation intensity, the effect of government regulation is larger than that of the market. The experience of failure in recent sampling tests motivates vendors to adopt higher levels of traceability. Recommendations regarding the frequency of food safety sampling tests conducted by the government and wholesale markets are proposed [EconLit Citations: Q18, L53].