Explaining smallholder maize marketing in southern and eastern Africa: The roles of market access,technology and household resource endowments

Research on household food grain sales behavior in developing countries has tended to focus on the roles of market access and prices to explain why many rural households do not sell staple crops, though recent literature suggests that low household asset endowments may also be key constraints. We use econometric analysis of panel data from smallholders in Kenya, Mozambique, and Zambia to inform the design of public investments that will enable smallholders to increase their maize sales. Results show that investments that raise farm-level productivity and land access are an essential complement to investments that improve market access.     

Heterogeneous incentives for innovation adoption: The price effect on segmented markets

It is now commonly accepted that poverty alleviation and the development of agricultural value chains in low income countries require farmers to innovate. However numerous constraints to innovation adoption have been identified. In the literature, the market structures on which producers sell their output have received remarkably little attention. In this article, I argue that these can impact a producer’s choices with respect to the level of effort invested in changing agricultural practices. More specifically, due to transaction costs, contract farming and other market imperfections, output prices and production levels in rural areas are often jointly determined, leading to market segmentation. I develop a simple model to discuss how market segmentation induces non-trivial effects on incentives to innovate. Next, I rely on farm-level panel data from an extension project in the Peruvian highlands to test the empirical implications of the model. Producers that were not included in the formal market but close to it, performed better in improving agricultural practices. The indirect consequence of this investment is a higher price increase than the rest of the population, creating heterogeneous impacts of the programme, opportunities for economic mobility and a reduction in inequality. The evidence indicates how considering the effects of market structures leads to a more nuanced understanding of the process of agricultural innovation adoption in low and middle income countries.     

The impact of farm input subsidies on maize marketing in Malawi

This paper investigates the effects of subsidised fertilizer on marketing of maize in Malawi. It uses the nationally representative two-wave Integrated Household Panel Survey (IHPS) data of 2010 and 2013. The results suggest that subsidised fertilizer on average increases farmers’ maize market participation as sellers, total quantity of maize sold, and maize commercialisation. In addition, participation in subsidised fertilizer programme is found to increase the probability of farmers to be net sellers and increases net quantity of maize sold. However, the study finds no evidence of effect on net quantity of maize bought and on household maize self-sufficiency. These results suggest that the farm input subsidy programme has contributed toward an increased level of maize market supply engagement for small farmers and in this sense, the policy has the potential to provide the wider external benefits. Furthermore, the results have implication on the sustainability of the subsidy programme, policy formulation and design of programmes for the agricultural sector and small farmers in developing countries.     

Impact of contract farming on land productivity and income of maize and potato growers in Pakistan

While the positive income effect of contract farming is well established in the literature, the heterogeneity of effects for different crops has not been widely investigated. This study compares the income and productivity effects of large-scale contract farming under contract schemes for potatoes and maize in Pakistan. In the area of the study, maize is a common staple crop, widely available in the market, while the potatoes produced by contract farmers are a special variety not sold in the market. We find that potato contracting is associated with significantly higher income for participating farmers, while maize contracting has no association with either income or productivity. We found no negative association between contract participation and income from other sources. Taken together, these results show a higher total household income for potato contract farmers. We also show unique evidence that potato contract farmers tend to employ more skilled workers under a salary system for the management of farms, which implies that contract farming may have positive spillover effects in the skilled labor market. Neither scheme, however, is associated with larger employment of agricultural labor for simple tasks.     

Consumer acceptability of yellow maize products in Zimbabwe

This study analyzes consumers’ awareness of and attitudes towards yellow maize products in Zimbabwe and suggests intervention strategies that will ensure increased production and consumption of the crop, which is rich in provitamin A to help prevent the incidence of vitamin A deficiency prevalent among vulnerable groups. Data from 360 randomly selected rural and urban households show that yellow maize is known to all but few are aware of its nutritional qualities or consume it. The main source of supply is imported food aid. Rich in oils, carotenoids and fructose, yellow maize easily undergoes chemical changes to produce unacceptable organoleptic properties (or bad taste) if poorly handled during importation. These two factors are responsible for it being perceived inferior to white maize by consumers. Quality assurance during importation can improve consumer confidence but a long-term strategy will be to vigorously promote domestic production of yellow maize varieties rich in high levels of β-carotene that meet the preferences of consumers. Drawing from a probit model regression analysis, nutritional education can potentially promote yellow maize consumption, especially if targeted at low income households. Domestic production and consumption of yellow maize will decrease vitamin A deficiency among vulnerable groups and improve food insecurity through reduced grain prices and increased incomes for farmers. These results draw attention to the need for policy makers in developing countries to review their agricultural policies to ensure that they do not undermine the local production and consumption of nutritionally valuable crops.     

Rental markets,gender, and land certificates: Evidence from Vietnam

In developing countries, a significant share of land transactions occurs among closely related parties and often does not entail any specific compensation (in-kind or monetary). Despite the prevalence of these non-market or informal transactions, the literature has paid little attention to the determinants and consequences of these exchanges. In this paper we shed light on the role land use certificates play on the agreed compensation of rental agreements when landlords, particularly those with weaker ex-ante tenure security (i.e. women), rent out land to their relatives in Viet Nam. We find that female-headed households who lease their plots to relatives are less likely to receive any type of payment, unless they possess a title for the plot they leased. A regional decomposition of our results shows that this effect is more predominant in the Northern regions.     

Subsistence production,markets, and dietary diversity in the Kenyan small farm sector

Undernutrition and low dietary quality remain widespread problems in poor population segments, especially among smallholder farmers in sub-Saharan Africa. Hence, the question how smallholder systems can be made more nutrition-sensitive is of particular relevance for research and policy. Recent studies analyzed whether increasing farm production diversity may help to improve nutrition. Most existing studies found a positive but small effect on dietary diversity on average. The underlying mechanisms were not examined in detail. This article tests the hypothesis that the effect of farm diversity on nutrition is small because production diversity is positively associated with dietary diversity obtained from subsistence production but negatively associated with dietary diversity obtained from the market. This hypothesis is confirmed with data from Kenya, using different indicators of production diversity and dietary diversity scores at household and individual levels. The results underline the important role of markets for smallholder diets and nutrition. Hence, strengthening markets and improving market access should be a key strategy to make smallholder systems more nutrition-sensitive.     

The effects of price deregulation on maize marketing margins in South Africa

There has been continuous controversy over the impact of food market reforms on food security in Africa. In South Africa, the government and media have often questioned the effects of price deregulation of maize meal, the major staple food, on consumers. This article determines the effect of retail price deregulation on the size of maize milling/retail margins in South Africa. Regression models of monthly milling/retail margins are run from the period May 1976 to December 2004. To assess the robustness of our findings, we estimate several different models of structural change, vary the sample period to examine the sensitivity of findings to unusual weather and market conditions in the region during episodes between 2001 and 2004, and run the models using different estimation techniques, OLS with Newey-West robust estimators and Feasible General Least Squares. In virtually all models, the results indicate that real maize milling/retailing margins in South Africa have increased by at least 20% since the deregulation of retail prices in 1991. Moreover, there is evidence of trend growth in the size of the milling margin over time. Simulations indicate that the deregulation of maize meal prices has entailed a transfer of at least US$179 million/year from consumers to agents in the marketing system. Further study is needed to understand why this outcome in South Africa differs from findings in other countries in the region concerning the effects of reform on food marketing margins.     

Quinoa quandary: Cultural tastes and nutrition in Peru

Using a model of household food demand that incorporates regional preferences (tastes) for culturally appropriate food, I investigate whether tastes for quinoa in the Puno region of Peru reduced household nutrition intakes when quinoa prices dramatically increased between 2004 and 2012. Adapting a model from Atkin (2013) and utilizing data from a national Peruvian household survey (ENAHO), I am able to deconstruct regional changes in household nutrition over time into several general equilibrium effects; in particular, I isolate the effect of regional tastes for quinoa on nutrition outcomes. This effect is identified by an exogenous spike in quinoa prices driven by international demand for quinoa. While I find evidence that regional tastes for quinoa do exist in the Puno region, these tastes do not have a statistically significant impact on nutrition outcomes. My results lend support to the conjecture that tastes for culturally appropriate food do not meaningfully affect household nutrition if the food in question is a sufficiently small component of a household’s overall diet.     

Commodity price inflation, retail pass-through and market power

When commodity prices rise, wholesalers and retailers of products derived from basic commodities respond by passing along at least a portion of the price increase to consumers. In this paper we examine whether firms respond differently to positive commodity price shocks than to negative commodity price shocks; that is, whether commodity price volatility alters market power. We exploit recent volatility in food commodity prices over the period 2007-2010 to investigate how commodity price shocks translate into market power in two different vertically-structured food product industries: potatoes and fluid milk. For potatoes, we find both wholesale and retail market power decreases (increases) during periods of rising (falling) commodity prices. Moreover, price-cost margins widen a substantially greater degree in response to negative shocks than margins narrow in response to positive shocks, indicating that commodity price volatility increases market power. For fluid milk, we find that market power likewise declines during periods of rising commodity prices; however, market power does not significantly change during periods of falling commodity prices, suggesting that commodity price volatility decreases market power.     

Agricultural growth,poverty, and nutrition in Tanzania

Rapid economic growth does not appear to have significantly improved poverty and nutrition outcomes in Tanzania. We link recent production trends to household incomes using a regionalized, recursive dynamic computable general equilibrium and microsimulation model. Results indicate some inconsistency between recent growth and poverty measurements in Tanzania. We also find that the structure of economic growth may have constrained the rate of poverty reduction. Agricultural growth has been driven by larger-scale farmers who are less likely to be poor; and has been concentrated among crops grown in specific regions of the country. Slow expansion of food crops and livestock also explain the weak relationship between agricultural growth and nutrition outcomes. We find that accelerating agricultural growth, particularly in maize, strengthens the growth–poverty relationship and enhances households’ caloric availability, while also contributing significantly to growth itself.     

Farmer training in off-season vegetables: Effects on income and pesticide use in Bangladesh

The cultivation of crops outside the regular cropping calendar when supply is low and prices are high can give farmers better profits and consumers more choice. However, off-season production may increase pesticide risk if crops are more affected by pests and diseases and farmers do not handle pesticides correctly. This study quantified the effect of training in off-season tomato production on the income and pesticide use of smallholder vegetable farmers in southwestern Bangladesh. The study uses farm-level data from 94 trained and 151 non-trained farm households and applies propensity score matching and inverse probability weighting to correct for selection bias. For the average smallholder vegetable farmer, training increased net household income by about 48%. We found that 31% of the trained farm households who had initially adopted the technology continued its use in the second year, but farm households who discontinued using the technology also experienced significant income gains from the training. There was a significant increase in pesticide use (+56%) and although there was an improvement in pesticide handling practices, trained farmers may have been more exposed to pesticide health risk. The policy implication is that while off-season vegetable production can create dramatic income improvements, it is important to emphasize safe and sustainable pest management methods as part of policies promoting it.     

Effects of agricultural market policy on crop production in China

This paper investigates the effects of Chinese market policy on crop production in the reform process. After a brief review of the policy changes due to the reform, the theoretical significance of Chinese market policies for crop production is demonstrated diagrammatically. It is shown that under the current market system the production of main crops is significantly influenced by both market and quota prices. While relatively high quota reduces the influence of market prices on production, relative price changes between competing crops will lead to shifting farmers’ cultivation preferences if inputs are constant. Empirical analysis, based on cross-section data for the period 1985–1997 from the province of Zhejiang, confirms these hypotheses. The effects of policy variables, however, prove to be crop-specific. If the potential of crop production in China is to be better used, an even more market-oriented agricultural policy is required.     

Cereal marketing liberalization in Tanzania

There is considerable evidence that cereal market liberalization in Tanzania has been a success in spite of poor roads, shortage of capital and vehicles, and lack of market infrastructure and standardized measures. The legal status of the private sector is unclear, however, and public sector policies still favour a heavy official involvement in the marketing system. Farm-gate prices for maize fall off rapidly as one moves away from the primary marketing centres, but on-farm storage of maize poses farmers no insuperable difficulties. Successful implementation of liberalization calls for clarity and consistency in government policy, the reform of financial services, the sale of unused storage capacity to the private sector, the more active involvement of farmers in the liberalized system, the strengthening of extension services, and a policy for regulating interannual price variations.     

Explaining Intermetropolitan Variation in Housing Prices, Rents and Land Prices

In attempting to explain why housing prices, rents and urban land prices vary so dramatically between U.S. metropolitan areas, a simple model of a metropolitan housing market is presented identifying three interrelated submarkets. Estimating equations for rent, housing prices and urban land prices are identified and estimated using two-stage least squares. The empirical results provide strong support for the theoretical model concerning how these three submarkets interact. The results also suggest that household income and construction costs are the most important factors causing housing prices, rents and land prices to vary between metropolitan areas.     

New perspectives on farm size and productivity

The farm size and productivity debate has been limited by the focus on land or labor productivity, generally showing respective productivity advantages to smaller or larger sized farms. Our purpose is to provide new perspectives on the debate by bringing together evidence from a set of novel case studies in both rich and poor countries. Common to them are the adoption of total factor productivity (TFP) as the comparative performance measure, and the reliance on panels of farm micro data. The present article presents a synthesis of findings from five case studies in (i) Malawi, Tanzania, and Uganda; (ii) Bangladesh; (iii) Brazil; (iv) Australia; and (v) the United States. The preponderance of evidence from these studies suggests that there is no single economically optimal agrarian structure; rather, it appears to evolve with the stage of economic development. Certain farm sizes face relative productivity advantages, such as small farms in Africa. But with economic and market growth, that smallholder advantage will likely attenuate, moving toward constant and eventually increasing returns to size. Yet, importantly, small farms may be quite dynamic, and need not be a drag on agricultural growth until perhaps well into the development process.     

Identifying Participants in a Price-fixing Conspiracy: Output & Market Share Tests Reexamined

If there is a cartel agreement among a subset of firms in an industry, it should be predicted that all firms in that industry will increase prices. Nevertheless, industry prices alone should not indicate that a particular firm is guilty of that conspiracy. According to the output test and its market share variant – proposed by Blair and Romano – if the output or the market share of the firm that claims to be innocent in the collusive activity rises in response to the price increase, that firm's claim should be accepted as true. Using a collusive variant of the dominant firm model, this paper shows that these are not robust tests to reveal either innocence or guilt, and characterizes cases where they may pardon a guilty firm (Type I error) or indict an innocent firm (Type II error). This paper also shows that a market share test can not be used to prove a dominant firm's intent for predatory pricing.     

Can mobile phones improve gender equality and nutrition? Panel data evidence from farm households in Uganda

Since 2000, mobile phone technologies have been widely adopted in many developing countries. Existing research shows that use of mobile phones has improved smallholder farmers’ market access and income. Beyond income, mobile phones can possibly affect other dimensions of social welfare, such as gender equality and nutrition. Such broader social welfare effects have hardly been analyzed up till now. Here, we address this research gap, using panel data from smallholder farm households in Uganda. Regression results show that mobile phone use is positively associated with household income, women empowerment, food security, and dietary quality. These results also hold after controlling for possible confounding factors. In addition to the household-level analysis, we also look at who within the household actually uses mobile phones. Gender-disaggregation suggests that female mobile phone use has stronger positive associations with social welfare than if males alone use mobile phones. We cautiously conclude that equal access to mobile phones cannot only foster economic development, but can also contribute to gender equality, food security, and broader social development. Further research is required to corroborate the findings and analyze the underlying causal mechanisms.     

Supermarket contracts and smallholder farmers: Implications for income and multidimensional poverty

Food systems in developing countries are changing rapidly with a growing role of modern supermarkets. Supermarkets influence supply chains and the way agricultural products are sourced from farmers. Especially for the procurement of fresh fruits and vegetables, supermarkets often contract farmers directly to ensure consistent and high-quality supply. One important question, which is addressed here, is whether smallholder farmers benefit from supermarket contracts. Previous studies address this question, but mostly focus on income effects without exploring implications for other dimensions of household welfare, such as nutrition, health, or housing conditions. Moreover, most existing studies rely on cross-section data. We add to the literature by analyzing effects of supermarket contracts on income and multidimensional poverty using three rounds of panel data collected from smallholder vegetable farmers in Kenya and econometric models with household fixed effects. On average, supermarket contracts increase household income by over 40%. We also find significant reductions in income poverty and multidimensional poverty. Quantile regressions show that farmers in all income groups benefit, but richer households benefit more than poorer ones in absolute terms. However, supermarket contracts cause the strongest reductions in multidimensional deprivations among the poorest households.     

Rational Expectations, Market Fundamentals and Housing Price Volatility

This paper derives a forward-looking rational expectations house price model and empirically tests its ability to explain short-run fluctuations in real house prices. A novel approach to proxying the imputed rents of owner-occupied housing, as a function of observable housing market fundamentals, is combined with a housing market arbitrage relation to derive a present value model for real house prices. Tests of the rational expectations, nonlinear cross-equation restrictions reject the joint null hypothesis of rational expectations and the asset-based housing price model for quarterly, single-detached house prices in the city of Vancouver, British Columbia from 1979–1991. The model fails to fully capture observed house price dynamics in two real estate booms but tracks real house prices well in less volatile times, suggesting that prices may temporarily deviate from fundamental values in real estate price cycles.