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Smallholder market participation under transactions costs: Maize supply and fertilizer demand in Kenya

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  • Alene, Arega D.
  • Manyong, V.M.
  • Omanya, G.
  • Mignouna, H.D.
  • Bokanga, M.
  • Odhiambo, G.
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    Abstract

    This paper assessed the effects of transactions costs--relative to price and non-price factors--on smallholder marketed surplus and input use in Kenya. A selectivity model was used that accounts for the effects of transactions costs, assets, technology, and support services in promoting input use and generating a marketable surplus. Output supply and input demand responses to changes in transactions costs and price and non-price factors were estimated and decomposed into market entry and intensity. The results showed that while transactions costs indeed have significant negative effects on market participation, institutional innovations--such as group marketing--are also emerging to mitigate the costs of accessing markets. Output price has no effect on output market entry and only provides incentives for increased supply by sellers. On the other hand, both price and non-price factors have significant influence on adoption and intensity of input use. Overall, the findings suggest that policy options are available other than price policies to promote input use and marketed surplus. The paper concludes with implications for policy to induce greater input-output market participation among smallholders in Africa.

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    Bibliographic Info

    Article provided by Elsevier in its journal Food Policy.

    Volume (Year): 33 (2008)
    Issue (Month): 4 (August)
    Pages: 318-328

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    Handle: RePEc:eee:jfpoli:v:33:y:2008:i:4:p:318-328

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    Web page: http://www.elsevier.com/locate/foodpol

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    References

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    1. Jayne, T. S. & Jones, Stephen, 1997. "Food marketing and pricing policy in Eastern and Southern Africa: A survey," World Development, Elsevier, vol. 25(9), pages 1505-1527, September.
    2. Alex Winter-Nelson & Anna Temu, 2005. "Impacts of prices and transactions costs on input usage in a liberalizing economy: evidence from Tanzanian coffee growers," Agricultural Economics, International Association of Agricultural Economists, vol. 33(3), pages 243-253, November.
    3. Nigel Key & Elisabeth Sadoulet & Alain De Janvry, 2000. "Transactions Costs and Agricultural Household Supply Response," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(2), pages 245-259.
    4. de Janvry, Alain & Fafchamps, Marcel & Sadoulet, Elisabeth, 1991. "Peasant Household Behaviour with Missing Markets: Some Paradoxes Explained," Economic Journal, Royal Economic Society, vol. 101(409), pages 1400-417, November.
    5. Holloway, Garth & Nicholson, Charles & Delgado, Chris & Staal, Steve & Ehui, Simeon, 2000. "Agroindustrialization through institutional innovation: Transaction costs, cooperatives and milk-market development in the east-African highlands," Agricultural Economics, Blackwell, vol. 23(3), pages 279-288, September.
    6. Staal, Steven & Delgado, Christopher & Nicholson, Charles, 1997. "Smallholder dairying under transactions costs in East Africa," World Development, Elsevier, vol. 25(5), pages 779-794, May.
    7. Ephraim Nkonya & Ted Schroeder & David Norman, 1997. "Factors Affecting Adoption Of Improved Maize Seed And Fertiliser In Northern Tanzania," Journal of Agricultural Economics, Wiley Blackwell, vol. 48(1-3), pages 1-12.
    8. Coady, David P, 1995. "An Empirical Analysis of Fertilizer Use in Pakistan," Economica, London School of Economics and Political Science, vol. 62(246), pages 213-34, May.
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    Cited by:
    1. Olale, Edward & Cranfield, John A.L., 2009. "The Role of Income Diversification, Transaction Cost and Production Risk in Fertilizer Market Participation," 2009 Conference, August 16-22, 2009, Beijing, China 49929, International Association of Agricultural Economists.
    2. Otieno, David Jakinda & Omiti, John M. & Nyanamba, Timothy O. & McCullough, Ellen, 2009. "Application of Chow test to improve analysis of farmer participation in markets in Kenya," 2009 Conference, August 16-22, 2009, Beijing, China 50776, International Association of Agricultural Economists.
    3. Cazzuffi, Chiara & McKay, Andrew, 2012. "Rice market participation and channels of sale in rural Vietnam," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126566, International Association of Agricultural Economists.
    4. Takeshima, Hiroyuki & Winter-Nelson, Alex, 2010. "Sales location and supply response among semisubsistence farmers in Benin," IFPRI discussion papers 999, International Food Policy Research Institute (IFPRI).
    5. Sigei, Geoffrey & Bett, Hillary & Kibet, Lawrence, 2014. "Determinants of Market Participation among Small-scale Pineapple Farmers in Kericho County, Kenya," MPRA Paper 56149, University Library of Munich, Germany.
    6. Zeng, Di & Alwang, Jeffrey & Norton, George & Shiferaw, Bekele & Jaleta, Moti & Yirga, Chilot, 2013. "Ex-Post Impacts of Improved Maize Varieties on Poverty in Rural Ethiopia," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149823, Agricultural and Applied Economics Association.
    7. Rutto, Jamin K. & Odhiambo, Mark O. & Njuguna, Esther M. & Murithi, Festus M., 2012. "Determinants of Market Participation Decision in Small Ruminants’ Market by Livestock Keepers in Isiolo and Marsabit Districts, Kenya," 2012 Eighth AFMA Congress, November 25-29, 2012, Nairobi, Kenya 159402, African Farm Management Association (AFMA).
    8. Takeshima, Hiroyuki & Nkonya, Ephraim M. & Deb, Sayon, 2012. "Impact of fertilizer subsidies on the commercial fertilizer sector in Nigeria:: Evidence from previous fertilizer subsidy schemes," NSSP working papers 23, International Food Policy Research Institute (IFPRI).
    9. Gebremedhin, Berhanu & Jaleta, Moti, 2010. "Commercialization of Smallholders: Is Market Participation Enough?," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa 96159, African Association of Agricultural Economists (AAAE);Agricultural Economics Association of South Africa (AEASA).
    10. Larson, Donald F. & Gurara, Daniel Zerfu, 2013. "A conceptual model of incomplete markets and the consequences for technology adoption policies in Ethiopia," Policy Research Working Paper Series 6681, The World Bank.
    11. Gebremedhin, Berhanu & Tegegne, Azage, 2012. "Market Orientation and Market Participation of Smallholders in Ethiopia: Implications for Commercial Transformation," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 125847, International Association of Agricultural Economists.
    12. Andersson Djurfeldt, Agnes & Djurfeldt, Göran & Bergman Lodin, Johanna, 2013. "Geography of Gender Gaps: Regional Patterns of Income and Farm–Nonfarm Interaction Among Male- and Female-Headed Households in Eight African Countries," World Development, Elsevier, vol. 48(C), pages 32-47.
    13. Jaleta, Moti & Gebremedhin, Berhanu, 2010. "Crop-Livestock Interactions in Smallholders’ Market Participation: Evidence from Crop-Livestock Mixed Systems in Ethiopia," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa 96168, African Association of Agricultural Economists (AAAE);Agricultural Economics Association of South Africa (AEASA).

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