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Linking Farms, Firms and Consumers in LDCs to GVC

Paper Session

Friday, Jan. 4, 2019 10:15 AM - 12:15 PM

Atlanta Marriott Marquis, International 10
Hosted By: American Economic Association
  • Chair: Josepa (Pepita) Miquel-Florensa, Toulouse School of Economics

Cutting Out the Middleman: The Structure of Chains of Intermediation

Matthew Grant
,
Princeton University
Meredith Startz
,
Princeton University

Abstract

Wholesalers and other intermediaries play a major role in trade, in spite of the convenient fiction in much of the literature that producers sell directly to consumers all over the world. In fact, goods may pass along a whole chain of intermediaries – perhaps especially so in developing countries. The route and market structure at each link will influence effective trade costs, passthrough, and the gains from trade. We model the formation of these chains, and show how the structure can vary systematically across locations and products, and change endogenously in response to trade costs. Consumers in entrepôts benefit from indirect demand flowing through their location, and contrary to the typical intuition, consumers in end destinations can also benefit from longer chains of intermediation in some cases

Export Markets and Microenterprise Performance: Evidence from Vietnam

Brian McCaig
,
Wilfrid Laurier University
Nina Pavcnik
,
Dartmouth College

Abstract

Most workers in low-income countries work for a microenterprise or a farm. We examine how export opportunities induced by the 2001 U.S.-Vietnam Bilateral Trade Agreement affect performance of non-farm micro enterprises in Vietnam. Microenterprise in industries with greater declines in U.S. tariffs on Vietnamese exports expand revenue and are more likely to hire non-household members as workers. Moreover, the responses to tariff cuts differ with initial size of a microenterprise. Initially small businesses experience a contraction of revenue and are less likely to hold a business license in response to tariff cuts, while initially larger businesses account for the observed expansion of revenue within an industry in response to export opportunities. Our results suggest that new export opportunities induced a relative reallocation of workers from micro enterprises to employers in the formal enterprise sector by the relative expansion of employment of firms in the formal sector.

The Effects of Fair Trade Certification: Evidence From Coffee Producers in Costa Rica

Nathan Nunn
,
Harvard University
Raluca Dragusanu
,
Harvard University

Abstract

We examine the effects of Fair Trade (FT) certification of coffee on producers and households in Costa Rica. Examining the production dynamics of the universe of Costa Rican coffee mills from 1999–2014, we find that FT certification is associated with a higher sales price, greater sales, and more revenues. As expected, these effects are greater when global coffee prices are lower and the FT guaranteed minimum price is binding. Looking at households, we find evidence that FT is associated with higher incomes for all families, but especially for those working in the coffee sector. However, we also find that, within this sector, the benefits are not evenly distributed. Skilled coffee growers benefit from FT, intermediaries are hurt, and unskilled workers are unaffected. Thus, although FT creates sizable benefits (on average), it also results in a redistribution from intermediaries to farmers. Lastly, we also find evidence of positive effects of FT certification on the education of high-school-aged children, which is most likely due to the presence of scholarship programs that are funded by FT premiums.

Improving Export Quality: The Case of the Sustainable Quality Program in Colombian Coffee

Josepa (Pepita) Miquel-Florensa
,
Toulouse School of Economics
Rocco Macchiavello
,
London School of Economics

Abstract

Improving quality in export-oriented agricultural chains has the potential to increase incomes among small-holders farmers in developing countries. Yet, challenges in both input and output markets often make it impossible to transmit to the farm gate potential price premia in export market. This paper studies the case of the sustainable quality program in Colombia. We match detailed administrative data on the universe of Colombian Coffee farmers with transaction-level data along three stages in the coffee chain, from the export gate to the farm gate. Using various identification strategies, including a geographic discontinuity design and a plot fixed-effect DID, we find that the program induced farmers to upgrade their coffee plantations; expand their farms; production; quality; and loyalty of their marketing arrangement. Most notably, a price premium of approximately 5-8% is fully transmitted along the supply chain, from the export gate to the farm gate. Upstream the price premium is entirely explained by higher quality; downstream the premium is hidden beneath credit provision and demand assurance provided by the large international buyer.
Discussant(s)
Lorenzo Casaburi
,
University of Zurich
Marti Mestieri
,
Northwestern University
Ameet Morjaria
,
Northwestern University
David Atkin
,
Massachusetts Institute of Technology
JEL Classifications
  • F1 - Trade
  • O1 - Economic Development