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Bayes estimates of distance-to-market: transactions costs, cooperatives and milk-market development in the Ethiopian highlands

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  • Garth Holloway

    (Department of Agricultural and Food Economics, University of Reading, UK)

  • Simeon Ehui

    (The World Bank, Washington, DC, USA)

  • Amare Teklu

    (Graduate Program, Cornell University, Ithaca, NY, USA)

Abstract

Rationalizing non-participation as a resource deficiency in the household, this paper identifies strategies for milk-market development in the Ethiopian highlands. The additional amounts of covariates required for positive marketable surplus-'distances-to market'-are computed from a model in which production and sales are correlated; sales are left-censored at some unobserved threshold; production efficiencies are heterogeneous; and the data are in the form of a panel. Incorporating these features into the modeling exercise is important because they are fundamental to the data-generating environment. There are four reasons. First, because production and sales decisions are enacted within the same household, both decisions are affected by the same exogenous shocks, and production and sales are therefore likely to be correlated. Second, because selling involves time and time is arguably the most important resource available to a subsistence household, the minimum sales amount is not zero but, rather, some unobserved threshold that lies beyond zero. Third, the potential existence of heterogeneous abilities in management, ones that lie latent from the econometrician's perspective, suggest that production efficiencies should be permitted to vary across households. Fourth, we observe a single set of households during multiple visits in a single production year. The results convey clearly that institutional and production innovations alone are insufficient to encourage participation. Market-precipitating innovation requires complementary inputs, especially improvements in human capital and reductions in risk. Copyright © 2008 John Wiley & Sons, Ltd.

Suggested Citation

  • Garth Holloway & Simeon Ehui & Amare Teklu, 2008. "Bayes estimates of distance-to-market: transactions costs, cooperatives and milk-market development in the Ethiopian highlands," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(5), pages 683-696.
  • Handle: RePEc:jae:japmet:v:23:y:2008:i:5:p:683-696
    DOI: 10.1002/jae.1019
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    File URL: http://qed.econ.queensu.ca:80/jae/2008-v23.5/
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    References listed on IDEAS

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    1. Chib, Siddhartha, 1992. "Bayes inference in the Tobit censored regression model," Journal of Econometrics, Elsevier, vol. 51(1-2), pages 79-99.
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    Cited by:

    1. Liverpool-Tasie, Lenis Saweda, 2012. "Targeted Subsidies and Private Market Participation: An Assessment of Fertilizer Demand in Nigeria:," IFPRI discussion papers 1194, International Food Policy Research Institute (IFPRI).
    2. Abdulbaki Bilgic & Steven T. Yen, 2014. "Demand for meat and dairy products by Turkish households: a Bayesian censored system approach," Agricultural Economics, International Association of Agricultural Economists, vol. 45(2), pages 117-127, March.
    3. Lenis Saweda O. Liverpool-Tasie, 2014. "Fertilizer subsidies and private market participation: the case of Kano State, Nigeria," Agricultural Economics, International Association of Agricultural Economists, vol. 45(6), pages 663-678, November.

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