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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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Bibliographic Info

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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  1. Theodosios B. Palaskas & Barbara Harriss-White, 1996. "The identification of market exogeneity and market dominance by tests instead of assumption: An application to Indian material," Journal of International Development, John Wiley & Sons, Ltd., vol. 8(1), pages 111-123.
  2. Marcel Fafchamps & Ruth Hill & Bart Minten, 2006. "Quality Control in Non-Staple Food Markets: Evidence from India," Economics Series Working Papers GPRG-WPS-057, University of Oxford, Department of Economics.
  3. Basu, Kaushik, 1986. "One Kind of Power," Oxford Economic Papers, Oxford University Press, vol. 38(2), pages 259-82, July.
  4. Fafchamps, Marcel & Minten, Bart, 1998. "Relationships and traders in Madagascar," MTID discussion papers 24, International Food Policy Research Institute (IFPRI).
  5. Minten, Bart & Reardon, Thomas & Sutradhar, Rajib, 2010. "Food Prices and Modern Retail: The Case of Delhi," World Development, Elsevier, vol. 38(12), pages 1775-1787, December.
  6. Miet Maertens & Johan F.M. Swinnen, 2006. "Trade, Standards, and Poverty: Evidence from Senegal," LICOS Discussion Papers 17706, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  7. Hayami, Y. & Kikuchi, M. & Marciano, E. B., 1999. "Middlemen and peasants in rice marketing in the Philippines," Agricultural Economics, Blackwell, vol. 20(2), pages 79-93, March.
  8. Bell, Clive & Srinivasan, T N & Udry, Christopher, 1997. "Rationing, Spillover, and Interlinking in Credit Markets: The Case of Rural Punjab," Oxford Economic Papers, Oxford University Press, vol. 49(4), pages 557-85, October.
  9. Swinnen, Johan F.M. & Vandeplas, Anneleen, 2009. "Market Power and Rents in Global Supply Chains," 2009 Conference, August 16-22, 2009, Beijing, China 53213, International Association of Agricultural Economists.
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  11. 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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  13. Hamish R. Gow & Johan F. M. Swinnen, 2001. "Private Enforcement Capital and Contract Enforcement in Transition Economies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 686-690.
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  18. Hayami, Y. & Kikuchi, M. & Marciano, E.B., 1999. "Middlemen and peasants in rice marketing in the Philippines," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 20(2), March.
  19. Marcel Fafchamps & Bart Minten, 2000. "Returns to Social Network Capital among Traders," Development Working Papers 145, Centro Studi Luca d\'Agliano, University of Milano.
  20. Thomas Reardon & C. Peter Timmer & Christopher B. Barrett & Julio Berdegué, 2003. "The Rise of Supermarkets in Africa, Asia, and Latin America," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(5), pages 1140-1146.
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