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Sales location and supply response among semisubsistence farmers in Benin

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  • Takeshima, Hiroyuki
  • Winter-Nelson, Alex

Abstract

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 on 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 paper 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. Dual-criteria and single-criterion models are compared while correcting inconsistency in estimations due to violation of homoskedasticity and normality assumptions in selection equations. The results suggest that the dual-criteria model provides more information than the single-criterion model using a sample of cassava producer in Benin.

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Bibliographic Info

Paper provided by International Food Policy Research Institute (IFPRI) in its series IFPRI discussion papers with number 999.

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Date of creation: 2010
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Handle: RePEc:fpr:ifprid:999

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Keywords: agricultural supply response; Development strategies; dual-criteria; sales location; Transaction costs;

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References

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  1. Christian H.C.A. Henning & Arne Henningsen, 2007. "Modeling Farm Households' Price Responses in the Presence of Transaction Costs and Heterogeneity in Labor Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(3), pages 665-681.
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  7. Marcel Fafchamps & Ruth Vargas Hill, 2005. "Selling at the Farmgate or Traveling to Market," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(3), pages 717-734.
  8. Vijverberg, W.P.M., 1991. "Dual selection criteria with multiple alternatives: migration, work status, and wages," Papers 78, World Bank - Living Standards Measurement.
  9. Catsiapis, George & Robinson, Chris, 1982. "Sample selection bias with multiple selection rules : An application to student aid grants," Journal of Econometrics, Elsevier, vol. 18(3), pages 351-368, April.
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  12. Vakis, Renos & Sadoulet, Elisabeth & de Janvry, Alain, 2003. "Measuring transactions costs from observed behavior : market choices in Peru," CUDARE Working Paper Series 962, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
  13. Alene, Arega D. & Manyong, V.M. & Omanya, G. & Mignouna, H.D. & Bokanga, M. & Odhiambo, G., 2008. "Smallholder market participation under transactions costs: Maize supply and fertilizer demand in Kenya," Food Policy, Elsevier, vol. 33(4), pages 318-328, August.
  14. Jinyong Hahn & Jerry Hausman, 2003. "Weak Instruments: Diagnosis and Cures in Empirical Econometrics," American Economic Review, American Economic Association, vol. 93(2), pages 118-125, May.
  15. Bera, Anil K & Jarque, Carlos M & Lee, Lung-Fei, 1984. "Testing the Normality Assumption in Limited Dependent Variable Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(3), pages 563-78, October.
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  18. Renkow, Mitch & Hallstrom, Daniel G. & Karanja, Daniel D., 2004. "Rural infrastructure, transactions costs and market participation in Kenya," Journal of Development Economics, Elsevier, vol. 73(1), pages 349-367, February.
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