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Allocative Efficiency of Agrifood Traders: Shrimp Traders in Indonesia

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  • Dale Yi
  • Thomas Reardon

Abstract

Shrimp is one of Indonesia's most important agricultural export commodities, with an annual export value exceeding $1 billion. If this high-value sector is to remain competitive and continue to grow, rural traders must be able to efficiently allocate scarce labour and factor inputs to trade shrimp. This study tests for factors leading to allocative inefficiency in the shrimp trade, by estimating a stochastic cost frontier on the basis of data from a survey of 200 shrimp traders in Central Java and South Sulawesi. Our results show that larger firms have a distinct cost advantage in trade and, owing in part to greater access to factor markets, are more efficient in allocating factors. Small firms can improve their allocative efficiency and become more competitive by specialising in trading one shrimp variety and by using output contracts to mitigate risk in the output market.

Suggested Citation

  • Dale Yi & Thomas Reardon, 2015. "Allocative Efficiency of Agrifood Traders: Shrimp Traders in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 51(3), pages 405-423, December.
    • Handle: RePEc:taf:bindes:v:51:y:2015:i:3:p:405-423
    DOI: 10.1080/00074918.2015.1107676
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    Cited by:

    1. Keijiro Otsuka, 2021. "Strategy for Transforming Indonesian Agriculture," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 57(3), pages 321-341, September.
    2. Reardon, Thomas & Liverpool-Tasie, Saweda & Minten, Bart, 2022. "IFAD Research Series 78: The Small and Medium Enterprises’ quiet revolution in the hidden middle of food systems in developing regions," IFAD Research Series 321998, International Fund for Agricultural Development (IFAD).
    3. Thomas Reardon & Lenis Saweda O. Liverpool-Tasie & Bart Minten, 2021. "Quiet Revolution by SMEs in the midstream of value chains in developing regions: wholesale markets, wholesalers, logistics, and processing," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 13(6), pages 1577-1594, December.

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