Determinants of smallholder farmers' participation in banana markets in Central Africa: the role of transaction costs

A bivariate probit model was employed to jointly and separately estimate banana market participation decisions of buying and selling households in Rwanda and Burundi using household survey data. Selectivity bias was corrected for estimating the transacted volumes using Heckman's procedure. The results showed that transaction cost‐related factors such as geographical location of households, market information sources, and travel time to the nearest urban center influence market participation. Non‐price‐related factors such as security of land tenure, labor availability, off‐farm income, gender of the household head, and years of farming experience had a significant influence on the transacted volumes. Output prices had a significant correlation with sales volume, indicating price incentives increased supply by sellers. Generally, the findings suggest that policies aimed at investments in rural road infrastructure, market information systems, collective marketing, and value addition of banana products may provide a potential avenue for mitigating transaction costs and enhancing market participation and production of marketed surplus by rural households.     

Horticulture exports, agro-industrialization, and farm–nonfarm linkages with the smallholder farm sector: evidence from Senegal

In this article we address the question of farm–nonfarm linkages at the household level in Senegal. We examine whether increasing off-farm employment opportunities for rural households—resulting from increased horticulture exports and associated agro-industrialization—has benefitted the smallholder farm sector through investment linkages. We use data from a household survey in the main horticulture export region in Senegal. We find that access to unskilled employment in the export agro-industry has contributed to the alleviation of farmers' liquidity constraints, resulting in increased smallholder agricultural production.     

Reassessing marketing boards as hybrid arrangements: evidence from Canadian experiences

In this article, we reassess the role of marketing boards and similar arrangements that have played an important role in numerous agro‐food sectors of developed countries over almost a century. Referring to transaction cost economics and to more recent contributions on the allocation of decision and property rights, we interpret these arrangements as hybrid modes of governance. We hypothesize that uncertainty is the leading force pushing toward these organizational solutions and we explore forms of uncertainty at stake and their impact in shaping various types of hybrids. We also explore the role of institutional embeddedness in providing marketing boards and the like their legitimacy. Using numerous examples from Canadian marketing boards, we discuss the benefits and point out flaws of these arrangements. We conclude on the need to assess comparatively the role of these solutions with respect to, for example, a system of bilateral contracts.     

Estimating the supply response of cotton and cereal crops in smallholder production systems: recent evidence from Mali

Cotton is one of the most important crops in West Africa and is a major catalyst of economic development in rural areas, but the sector has suffered from a decline in the world cotton price after 1999. This article exploits an unusual data set following 82 farmers over 14 years, from 1994 through 2007, to estimate a Nerlovian supply response model for cotton, maize, sorghum, and millet in long-term rotation. The resulting system of equations is estimated with two-stage least squares (2SLS), showing that this sample of Malian cotton producers have responded to prices in a relatively inelastic manner, with supply elasticities only about one-half of those estimated for producers in developed countries. Policy reforms could help producers respond more easily to prices changes, as well as to raise average productivity levels.     

Effect of off‐farm income on smallholder commercialization: panel evidence from rural households in Ethiopia

This article investigates how off‐farm income affects crop output market participation decisions and marketed surplus of smallholder farmers in Ethiopia. A double‐hurdle model is estimated using three waves of panel data from the Ethiopian Rural Household Survey. Unobserved heterogeneity is controlled for using a correlated random effect procedure and potential endogeneity of explanatory variables using a control function approach. The results show that off‐farm income has no significant influence on household crop output market participation. However, conditional on market participation, additional off‐farm earnings negatively affect the marketed surplus. This indicates that farmers use off‐farm earnings for consumption rather than for investment in agricultural production. Policy measures that promote rural investment may help increase returns to labor for land‐poor households participating in off‐farm work in the process of agricultural commercialization.     

Capital market imperfections in economic transition: empirical evidence from Ukrainian agriculture

This article investigates the link between financing and investment in Ukrainian agriculture during economic transition. The main contribution of the study is to provide empirical evidence for the coexistence of financial constraints and soft budget constraints (SBCs). This is of particular importance because credit constraints and SBCs have completely different economic effects. The lack of differentiation between these forms of capital market imperfections yields overlapping effects of financing on investment and may therefore cause a misinterpretation of econometric results. Our empirical analyses are based on an econometric estimation of the Euler investment equations for 529 large farms from three Ukrainian regions between 2001 and 2005. The results confirm that financial variables significantly influence farms' investment, providing empirical evidence of an imperfect capital market in Ukrainian agriculture. It turns out that credit constraints in the Ukrainian agricultural sector are more important than SBCs. We show that the estimated level of financial constraints for profitable farms with access to loans is higher if both types of capital market imperfections are appropriately distinguished.     

The firm size,farm size,and transaction costs: the case of hazelnut farms in Turkey

This study analyzes the effects of transaction costs on the size of hazelnut farms in Turkey. The study finds that higher land slope and higher variance of rain, as transaction‐cost‐increasing natural effects, lead to smaller hazelnut land holdings. High slope and weather variation can increase the costs of monitoring the laborers, make moving inputs or output up and down harder, limit the use of machinery, and reduce contractual performance of labor contracts. For farm production functions, land is a complex input with measurable interactions with nature. Contrary to common production theory approaches that take natural properties of land as given, the study develops a production function that incorporates natural properties, such as, slope and rain variance. The study utilizes two separate data sets for the estimations. The first data set explores the characteristics of hazelnut farmers, while the second one analyzes the regional characteristics of hazelnut farms.     

Sales location among semi‐subsistence cassava farmers in Benin: a heteroskedastic double selection model

In much of rural Africa, high transaction costs limit farmers’ market participation and thus their potential for income growth. Transaction costs can affect not only whether a farmer sells product but also whether sales occur at the farm gate or at a market. If production behavior is related to a chosen sales location, then analysis of interventions can be improved by explicit consideration of the decision of where to sell. This article develops a double‐selection model that explains consumption and production decisions by semi‐subsistence farmers who first decide whether to be a seller and then whether to sell at the farm gate or at an off‐farm location before deciding on production and consumption. The study tests the validity of this dual‐criteria model against a single‐criterion model in which a grower first decides to be a seller and then decides production, consumption, and sales location simultaneously. The results suggest that the dual‐criteria model provides more information than the single‐criterion model using a sample of cassava producer in Benin.     

Agricultural production and children's diets: evidence from rural Ethiopia

We study the relationship between pre‐school children's food consumption and household agricultural production. Using a large household survey from rural Ethiopia, we find that increasing household production diversity leads to considerable improvements in children's dietary diversity. However, we also document how this nonseparability of consumption and production does not hold for households that have access to food markets. These findings imply that nutrition‐sensitive agricultural interventions that push for market integration are likely to be more effective in reducing under‐nutrition than those promoting production diversity.     

Adoption of organic farming in Germany and Austria: an integrative dynamic investment perspective

Farm‐level adaptation to changing economic environments is often slower than expected. Technological innovations, for instance, are frequently adopted at a later date than the net present value of investment suggests. This can be explained by a model of “investment under uncertainty,” which consistently accounts for uncertainty, sunk costs, and the flexibility of investment timing. Its essential conclusion is that, due to temporal opportunity costs, critical incremental cash flows that trigger investments might be higher than those needed for simple cost recovery. This accounts for an ostensible reluctance to invest (economic hysteresis). In this article, we demonstrate how slow conversion to organic farming in general, and the different rates of conversion in Germany and Austria in particular, can be explained by the new investment theory.     

Bias from Farmer Self‐Selection in Genetically Modified Crop Productivity Estimates: Evidence from Indian Data

In the continuing debate over the impact of genetically modified (GM) crops on farmers of developing countries, it is important to accurately measure magnitudes such as farm‐level yield gains from GM crop adoption. Yet most farm‐level studies in the literature do not control for farmer self‐selection, a potentially important source of bias in such estimates. We use farm‐level panel data from Indian cotton farmers to investigate the yield effect of GM insect‐resistant cotton. We explicitly take into account the fact that the choice of crop variety is an endogenous variable which might lead to bias from self‐selection. A production function is estimated using a fixed‐effects model to control for selection bias. Our results show that efficient farmers adopt Bacillus thuringiensis (Bt) cotton at a higher rate than their less efficient peers. This suggests that cross‐sectional estimates of the yield effect of Bt cotton, which do not control for self‐selection effects, are likely to be biased upwards. However, after controlling for selection bias, we still find that there is a significant positive yield effect from adoption of Bt cotton that more than offsets the additional cost of Bt seed.     

The impacts of information on returns from farming: evidence from a nationally representative farm survey in India

Using a nationally representative sample of farm households from India, this paper examines the impact of use of information on net farm incomes. Employing methodologies that mitigate potential biases in the estimation of the impact, the empirical results show that farmers who use information realize over 12% higher net returns per hectare. The paper also establishes a pecking order in access to information. Small farmers and those at the bottom of social hierarchy (based on caste) have access to fewer information sources, and they depend more on informal social networks and input dealers for their information needs. The larger farmers and those from upper caste rely relatively more on sources such as radio, television and newspaper.     

Impact of cooperatives on smallholders' commercialization behavior: evidence from Ethiopia

This article examines the impact of marketing cooperatives on smallholder commercialization of cereals using detailed household data in rural Ethiopia. We use the strong government role in promoting the establishment of cooperatives to justify the use of propensity score matching to compare households that are cooperative members to similar households in comparable areas without cooperatives. The analysis reveals that although cooperatives obtain higher prices for their members, they are not associated with a significant increase in the overall share of cereal production sold commercially by their members. However, these average results hide considerable heterogeneity across households. In particular, we find that smaller farmers tend to reduce their marketed output as a result of higher prices, whereas the opposite is true for larger farmers.     

The importance of the savings device in precautionary savings: Empirical evidence from rural Bangladesh

We test if precautionary behavior in the consumption decisions of rural households differs across the forms of savings. Using monthly panel data from Bangladesh, we find that, on average, the savings device does not matter but that the effect of income on savings indeed depends on the savings device. Precautionary savings in the form of staple grain are relatively constant across income quartiles, while nongrain precautionary savings vary across income quartiles. Previous studies, which treat these two types of savings devices as fungible, misdiagnose the reasons for, and by extension the market failures behind, a large percentage of the precautionary savings held by rural households.     

Mobile Phones and Radios: Effects on Transactions Costs and Market Participation for Households in Northern Ghana

The literature on agricultural markets suggests that transactions costs are the main obstacles preventing households from participating in agricultural markets. We examine the impact of the recent massive penetration of information communication technologies (ICTs), particularly mobile phones and radios, in developing countries to investigate the role of information in economic transactions and participation in food crop markets. To fully capture market participation behaviours, the current theoretical framework on market participation and transactions costs is extended to include those households that sell and buy in the same time period. We correct for endogeneity and selectivity throughout our models. We used a novel dataset of 393 households in northern Ghana with detailed information on market transactions and ICTs usage. Results show that receiving market information via mobile phones has a positive and significant impact on market participation, with a greater impact for households with a surplus of food crops. We find that radios have a larger impact on the quantity traded. This may reflect the nature of mobile phones in reducing searching costs, whereas radios provide an updated and regular flow of information which affects the pattern of crops consumed and sold. We also emphasise that the most significant factor is how ICTs are used, rather than their ownership.     

Life satisfaction and diet in transition: evidence from the Russian Longitudinal Monitoring Survey

This article develops a theoretical framework and provides empirical evidence on the impacts of diet and lifestyles on life satisfaction in Russia using 1995–2005 data from the Russian Longitudinal Monitoring Survey. Our results suggest that diet measured as calories, fat, protein, and diversity of food consumption has a statistically significant effect on life satisfaction levels of the Russian population. In addition, living in a region with higher per capita income increases population's life satisfaction. While living in a rural area, having health problems, and having young children affect individual life satisfaction in Russia in a negative and statistically significantly way. Life satisfaction is also positively correlated with education and income, and negatively with unemployment. Better understanding of the drivers of life satisfaction and more generally of subjective well‐being in Russia can assist in the government decision‐making processes, including the allocation of scarce resources and the design of public health policies.     

Cattle sharing and rental contracts in an Agrarian economy: evidence from Ethiopia

Empirical evidence on the role of cattle sharing and rental contracts in agrarian economies is limited. This article is an investigation of different types of cattle sharing and rental contracts producers in rural Ethiopia adopt. It also investigates why households in rural Ethiopia rely on these contracts that are vulnerable and therefore subject to potential moral hazard problems described in earlier literature. We apply random effect probit and control function econometric methods to household panel data collected in 2005 and 2007 from two agro‐ecological zones in Ethiopia. Controlling for the endogeneity of access to livestock credit, we find that contracts are spatially fragmented and better developed where population density is high and credit and insurance markets are poorly developed. We also find that contracts help cash poor and credit constrained households to improve their herd dynamics, to get access to nonlivestock resources (land, labor and cash) and share risks that could have been difficult without the contract. We show that contracts are rational responses of residents in rural communities characterized by imperfect credit and insurance services, since households with better access to credit are less likely to rely on contracts.     

Spatial dispersion of retail margins: evidence from Turkish agricultural prices

The farmer share of retail prices is shown to be about 16%, corresponding to about 84% of a distribution share, on average across agricultural products and regions within Turkey. The share of transportation costs in retail prices is only about 7%, while the share of retail margins is about 77% of retail prices. The dispersion of retail prices across regions is shown to be mostly due to local wages and variable markups, while the contribution of traded‐input prices is relatively small. Accordingly, the high dispersion of farmer prices across locations is not reflected in the dispersion of retail prices due to the high contribution of retail margins. These retail margins are also shown to account for about one third of the consumer welfare dispersion across regions and more than half of the consumer welfare dispersion across products.     

Annual and cropping season environmental production conditions effects on smallholder technical efficiency in sub‐Saharan Africa: Evidence from Ethiopia

This article investigates the impact of environmental production conditions on smallholder farmers’ technical efficiency in Ethiopia for wheat, maize, and sorghum farming. We use a household panel data set with annual and cropping season environmental production conditions to estimate the technical efficiency scores. The results show that including environmental production conditions in the stochastic frontier has a significant impact on farmers’ technical efficiency scores. Technical efficiency scores improve when environmental production conditions are incorporated in the stochastic frontier. Thus, accounting for environmental production conditions reduces the inefficiencies that otherwise may be attributed to the characteristics of smallholder farmers.