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From Plantations to Smallholder Production: The Role of Policy in the Reorganization of the Sri Lankan Tea Sector

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  • Herath, Deepananda
  • Weersink, Alfons

Abstract

Summary The Sri Lankan tea sector has changed from one dominated by vertically integrated plantations to one where independent processors of black tea purchase their input (green leaf tea) from small, independent growers. This paper provides a unifying conceptual framework to characterize three major factors affecting the changes in vertical coordination arrangements (transaction, production, and management costs). Regulation and government policy have altered these determinants of organizational change. Transaction costs have been reduced by state intervention into the price for green leaf which subsequently lowered the risk of processors re-negotiating prices downward. Production costs, which continue to be dominated by labor expenses due to the lack of technological developments for harvesting, have increased more for plantations than independent producers due to union pressures.

Suggested Citation

  • Herath, Deepananda & Weersink, Alfons, 2009. "From Plantations to Smallholder Production: The Role of Policy in the Reorganization of the Sri Lankan Tea Sector," World Development, Elsevier, vol. 37(11), pages 1759-1772, November.
  • Handle: RePEc:eee:wdevel:v:37:y:2009:i:11:p:1759-1772
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    Cited by:

    1. Klasen, Stephan & Meyer, Katrin M. & Dislich, Claudia & Euler, Michael & Faust, Heiko & Gatto, Marcel & Hettig, Elisabeth & Melati, Dian N. & Jaya, I. Nengah Surati & Otten, Fenna & Pérez-Cruzado, Cés, 2016. "Economic and ecological trade-offs of agricultural specialization at different spatial scales," Ecological Economics, Elsevier, pages 111-120.
    2. Gatto, Marcel & Wollni, Meike & Rosyani, Ir. & Qaim, Matin, 2015. "Oil Palm Boom, Contract Farming, and Village Development: Evidence from Indonesia," EFForTS Discussion Paper Series 10, University of Goettingen, Collaborative Research Centre 990 "EFForTS, Ecological and Socioeconomic Functions of Tropical Lowland Rainforest Transformation Systems (Sumatra, Indonesia)".
    3. Roehlano M. Briones & Jesus Felipe, 2016. "Agriculture and Structural Transformation in Developing Asia: Review and Outlook," Working Papers id:8696, eSocialSciences.
    4. Marisol Velazquez, 2014. "Commercialization and consumption of coffee in Mexico," ERSA conference papers ersa14p1681, European Regional Science Association.
    5. Briones, Roehlano & Felipe, Jesus, 2013. "Agriculture and Structural Transformation in Developing Asia: Review and Outlook," ADB Economics Working Paper Series 363, Asian Development Bank.
    6. Abebe, Gumataw K. & Bijman, Jos & Kemp, Ron & Omta, Onno & Tsegaye, Admasu, 2013. "Contract farming configuration: Smallholders’ preferences for contract design attributes," Food Policy, Elsevier, vol. 40(C), pages 14-24.
    7. Derek Byerlee, 2014. "The Fall and Rise Again of Plantations in Tropical Asia: History Repeated?," Land, MDPI, Open Access Journal, vol. 3(3), pages 1-24, June.

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