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Regulations, brokers, and interlinkages: The institutional organization of wholesale markets in India

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  • Bart Minten
  • Anneleen Vandeplas
  • Johan F.M.Swinnen

Abstract

There is a vigorous debate on the liberalization of heavily regulated agricultural markets in India. A crucial institutional characteristic is the role of state regulated brokers in wholesale markets. Relying on data from a unique survey in Uttarakhand, a state in North-India, we find that regulations on margins are ineffective as most brokers charge rates that significantly exceed the regulated ones. We also find that a majority of farmers self-select into long-term relationships with brokers. These relationships allow some of the farmers to interlink credit and insurance markets to the agricultural output market. This interlinkage does however not appear to be an instrument for farmer exploitation (as it does not lead to worse inputs, high interest rates, or lower implicit output prices), but is seemingly an extra service by brokers as to establish farmer loyalty to him and thus to ensure future supplies.

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Paper provided by LICOS - Centre for Institutions and Economic Performance, KU Leuven in its series LICOS Discussion Papers with number 28811.

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Date of creation: 2011
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Handle: RePEc:lic:licosd:28811

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Keywords: India; agricultural marketing; brokers; interlinkages;

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  17. Marcel Fafchamps, 2004. "Market Institutions in Sub-Saharan Africa: Theory and Evidence," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262062364, December.
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