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Endogenous institutional innovation and agroindustrialization on the Peruvian coast

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  • Escobal, Javier
  • Agreda, Victor
  • Reardon, Thomas

Abstract

This paper presents an analysis of endogenous institutional innovations that have recently emerged in the agroindustrial zone of Chincha, on the coast of Peru. These innovations include: (1) contracts between agroindustrial firms and large farmers, introduced by the firms themselves to assure timely delivery and compliance with strict requirements implied by the emerging demanding quality and safety standards for agro-export of processed asparagus; (2) management services exchanged for labor supervision and land collateral in share tenancy contracts between a management company and "farmer companies" of small cotton farmers. These contracts introduced by the management company illustrate those described theoretically by Eswaran and Kotwal [Am. Econ. Rev. 75 (3), 352-367]. The nature and importance of these institutional changes are twofold: (1) They were induced institutional innovations driven by the requirements of agroindustrialization itself. (2) Together they had ambiguous employment and income impacts (tending to the negative). On the one hand, the emergence of asparagus and firm-farm contracts reduced employment through exclusion of small farms and shifts to capital-intensive crops. On the other hand, the reinforcement of smallholder cotton and the emergence of farmer companies increased employment and income of smallholders. The institutional innovation allowed them to reduce risk and increase profits and thus access some of the benefits of agroindustrialization and globalization. While processing firm-farm contracts are common in Peru, as is the presence of NGOs bringing subsidized credit, the private management firm innovation is rare and new in Peru and apparently also in the region, and of great interest. In fact, policymakers and NGOs have recently discovered that this innovation is taking place and are asking hard questions about whether this innovation can and will be diffused. The interest in the private for-profit institutional change is
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  • Escobal, Javier & Agreda, Victor & Reardon, Thomas, 2000. "Endogenous institutional innovation and agroindustrialization on the Peruvian coast," Agricultural Economics, Blackwell, vol. 23(3), pages 267-277, September.
  • Handle: RePEc:eee:agecon:v:23:y:2000:i:3:p:267-277
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    1. Adolfo Figueroa, 1996. "Pequeña Agricultura y Agroindustria en el Perú," Revista Economía, Fondo Editorial - Pontificia Universidad Católica del Perú, issue 37-38, pages 93-170.
    2. Eswaran, Mukesh & Kotwal, Ashok, 1985. "A Theory of Contractual Structure in Agriculture," American Economic Review, American Economic Association, vol. 75(3), pages 352-367, June.
    3. Hoff, Karla & Stiglitz, Joseph E, 1990. "Imperfect Information and Rural Credit Markets--Puzzles and Policy Perspectives," World Bank Economic Review, World Bank Group, vol. 4(3), pages 235-250, September.
    4. Key, Nigel & Runsten, David, 1999. "Contract Farming, Smallholders, and Rural Development in Latin America: The Organization of Agroprocessing Firms and the Scale of Outgrower Production," World Development, Elsevier, vol. 27(2), pages 381-401, February.
    5. Carter, Michael R. & Mesbah, Dina, 1993. "Can land market reform mitigate the exclusionary aspects of rapid agro-export growth?," World Development, Elsevier, vol. 21(7), pages 1085-1100, July.
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    Cited by:

    1. Cook, Michael L. & Chaddad, Fabio R., 2000. "Agroindustrialization of the global agrifood economy: bridging development economics and agribusiness research," Agricultural Economics, Blackwell, vol. 23(3), pages 207-218, September.
    2. Marijke D'haese & Wim Verbeke & Guido Van Huylenbroeck & Johann Kirsten & Luc D'haese, 2005. "New Institutional Arrangements for Rural Development: The Case of Local Woolgrowers' Associations in the Transkei Area, South Africa," Journal of Development Studies, Taylor & Francis Journals, vol. 41(8), pages 1444-1466.
    3. Rosemary Thorp and Graciela Zevallos, "undated". "The Economic Policies Of The Fujimori Years: A Return To The Past?," QEH Working Papers qehwps83, Queen Elizabeth House, University of Oxford.
    4. Cook, Michael L. & Chaddad, Fabio R., 2000. "Agroindustrialization of the global agrifood economy: bridging development economics and agribusiness research," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 23(3), September.
    5. Gramzow, Andreas, 2009. "Rural development as provision of local public goods: Theory and evidence from Poland," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 51, number 92313, December.
    6. Lemeilleur, S., 2012. "International standards and small-scale farmer behaviors: evidence from Peru," Working Papers MOISA 201204, UMR MOISA : Marchés, Organisations, Institutions et Stratégies d'Acteurs : CIHEAM-IAMM, CIRAD, INRA, Montpellier SupAgro - Montpellier, France.
    7. Lemeilleur, Sylvaine, 2013. "Smallholder Compliance with Private Standard Certification: The Case of GlobalGAP Adoption by Mango Producers in Peru," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IFAMA), vol. 16(4).
    8. Gramzow, Andreas & Petrick, Martin, 2007. "Stimulating Cooperation Among Farmers In A Post-Socialist Economy: Lessons From A Public-Private Marketing Partnership In Poland," 47th Annual Conference, Weihenstephan, Germany, September 26-28, 2007 7580, German Association of Agricultural Economists (GEWISOLA).
    9. Schejtman, A. & Berdegué, J., 2008. "Rural Territorial Development," Working papers 004, Rimisp Latin American Center for Rural Development.
    10. Heath Henderson, 2014. "Structural transformation and smallholder agriculture: an information-theoretic analysis of the Nicaraguan case," Agricultural Economics, International Association of Agricultural Economists, vol. 45(4), pages 443-458, July.

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