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Multinational supermarket chains in developing countries: does local agriculture benefit?

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  • Hildegunn E. Stokke

Abstract

There is no consensus in the empirical literature on how entry of multinational supermarket chains affects farmers in developing countries. Econometric analyses struggle with causality issues and are unclear about the channel of effects. We quantify the dynamic effects of supermarket expansion on agriculture within a structural framework that clarifies the adjustment mechanisms involved. The model specification allows for endogenous interaction between agricultural productivity and supermarkets' choice of suppliers. Based on numerical simulations, two results emerge. First, we offer a possible interpretation of the conflicting evidence in the empirical literature. Whether farmers benefit from supermarkets or get stuck in a low productivity trap depends on the extent of local constraints related to production capacity and market access. Second, supply chain development initiated by supermarkets can help farmers escape the low productivity trap. While supermarkets face a short-run cost to supplier upgrading, they gradually gain from more productive local suppliers. Copyright (c) 2009 International Association of Agricultural Economists.

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Bibliographic Info

Article provided by International Association of Agricultural Economists in its journal Agricultural Economics.

Volume (Year): 40 (2009)
Issue (Month): 6 (November)
Pages: 645-656

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Handle: RePEc:bla:agecon:v:40:y:2009:i:6:p:645-656

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Cited by:
  1. Riungu, Claris Karimi, 2011. "Effects of Supermarkets on Fresh Fruit and Vegetables Small-Scale Farmers in Central Kenya," Research Theses, Collaborative Masters Program in Agricultural and Applied Economics 134484, Collaborative Masters Program in Agricultural and Applied Economics.
  2. Vandeplas, Anneleen, 2011. "Multinationals or Cooperatives: Does it Matter to Farmers? - A Study of the Dairy Sector in Punjab (India)," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland, European Association of Agricultural Economists 115545, European Association of Agricultural Economists.
  3. Wells, Patricia Bryn & Saghaian, Sayed H. & Osborne, William, 2013. "The Expansion of Food Retail in Developing Countries and Its Effects on the Hunger Index," 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida, Southern Agricultural Economics Association 142630, Southern Agricultural Economics Association.
  4. Andersson, Camilla I.M. & Kiria, Christine G. & Qaim, Matin & Rao, Elizaphan J.O., 2013. "Following up on smallholder farmers and supermarkets," Discussion Papers, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development 158142, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.

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