Small-Scale Vegetable Farmers’ Participation in Modern Retail Market Channels in Indonesia: The Determinants of and Effects on Their Income

The rise of supermarkets in Indonesia since the end of the 1990s have been transforming the food retail sector and providing further market opportunities for small-scale farmers, in which most of Indonesia’s farmer falls into this category. The aim of this paper is to examine the supermarket participation and its effect on the well-being of small-scale farmers. We compare the differences between participants and non-participants in supermarket channels in order to explore the constraints on supermarket participation. By applying a treatment effects model which allows capturing the possibility of selection bias, we examine the factors that determine farmers’ participation as well as the effect on their income. The results show that younger farmers with higher levels of education, irrigated land, who have packaging equipment and storage facilities, and are located near paved roads, are more likely to participate in the supermarket channels. On the other hand, farmers who have sprayer equipment are more likely to participate in the traditional market channels. The effect analysis shows that small-scale farmer participation in the supermarket channels can boost their income.