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Impact of third-party enforcement of contracts in agricultural markets—A field experiment in Vietnam

In: Innovation for inclusive value-chain development: Successes and challenges

Author

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  • Saenger, Christoph
  • Torero, Maximo
  • Qaim, Matin

Abstract

Chapter 11 (Saenger et al.) provides a perfect example of a randomized controlled impact evaluation. The authors conducted a randomized controlled trial and field experiment with dairy farmers and a milk-processing company in Vietnam. Their approach, designed ex ante, is a theoretically ideal approach to constructing a valid counterfactual and to ensuring that there is no selection bias, given that the farmers are randomly assigned to treatment (beneficiaries) and control groups. This randomization ensures that all farmers have the same chance of participating in the program and that the distribution of the two groups’ characteristics (both observed and unobserved) are statistically indistinguishable. The authors tested whether the quality-control procedures used by the processing company were leading farmers to underinvest. The risk on the farmers’ part came from the possibility that the company would manipulate the process and say that the milk delivered was of low quality and therefore deserved a lower price. By introducing vouchers for third-party quality measurement, the program improved the company’s credibility with the farmers. With this increased trust, the farmers then had more incentive to invest in techniques to improve milk quality and increase revenue. This chapter is unique in that it focuses on the mechanisms and incentives for different value-chain actors to contract with one another. The authors’ proposed contract-farming designs make both parties better off, rather than trying to cut out the intermediary or encourage smallholders to take over other capacities in the value chain.

Suggested Citation

  • Saenger, Christoph & Torero, Maximo & Qaim, Matin, 2016. "Impact of third-party enforcement of contracts in agricultural markets—A field experiment in Vietnam," IFPRI book chapters,in: Innovation for inclusive value-chain development: Successes and challenges, chapter 11, pages 343-374 International Food Policy Research Institute (IFPRI).
  • Handle: RePEc:fpr:ifpric:9780896292130-11
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    Citations

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    Cited by:

    1. Jo Swinnen & Rob Kuijpers, 2016. " Value chain innovations for technology transfer in developing and emerging economies: concept, typology and policy implications," Working Papers Department of Economics 539178, KU Leuven, Faculty of Economics and Business, Department of Economics.
    2. Torero, Maximo & Viceisza, Angelino C.G., 2016. "Potential collusion and trust: Evidence from a field experiment in Vietnam," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 11(1), pages 1-11.
    3. Qaim, Matin & Andersson, Camilla I.M. & Chege, Christine G.K. & Kimenju, Simon Chege & Klasen, Stephan & Rischke, Ramona, 2014. "Nutrition Effects of the Supermarket Revolution on Urban Consumers and Smallholder Farmers in Kenya," GlobalFood Discussion Papers 180976, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
    4. Sandip Mitra & Dilip Mookherjee & Maximo Torero & Sujata Visaria, 2018. "Asymmetric Information and Middleman Margins: An Experiment with Indian Potato Farmers," The Review of Economics and Statistics, MIT Press, vol. 100(1), pages 1-13, March.
    5. Nicholas Minot & Loraine Ronchi, 2014. "Contract Farming," World Bank Other Operational Studies 24249, The World Bank.
    6. Bernard, Tanguy & Hidrobo, Melissa & Le Port, Agnès & Rawat, Rahul, 2017. "Nutrition incentives in dairy contract farming in northern Senegal," IFPRI discussion papers 1629, International Food Policy Research Institute (IFPRI).
    7. Romero, Cristina & Wollni, Meike, 2015. "Supplier dynamics in horticultural export chains – Evidence from Ecuador. Revised version," GlobalFood Discussion Papers 209961, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.

    More about this item

    Keywords

    trade; market access; smallholders; producer organizations; transport; wholesale marketing; retail marketing; farmers organizations; value chains; food processors;

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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