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Distance to market and farm-gate prices of staple beans in rural Nicaragua

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  • Ebata, Ayako
  • Pacheco, Pamela Alejandra
  • Cramon-Taubadel, Stephan von

Abstract

While smallholder marketing is seen effective to reduce poverty, farmers in rural areas face a number of challenges in doing so. One of the most important factors is transaction costs related to transportation. Our study quantifies the benefits associated with improvement of rural road infrastructure by scrutinizing farm-gate prices of beans in rural Nicaragua. We find that the longer the distance and traveling time are to major commercial centers from farming communities, the less farm-gate prices producers receive. We find that a decrease in distance and traveling time by one unit is associated with an increase in farm-gate prices by 2-2.5 cents/qq. If infrastructure development can reduce travel time by 25%, an average farm household would increase its annual revenue from beans by between $24 and $110 (3% and 12% of annual revenue). Given that such infrastructure development affects all farmers and crops, our findings suggest a larger implication.

Suggested Citation

  • Ebata, Ayako & Pacheco, Pamela Alejandra & Cramon-Taubadel, Stephan von, 2015. "Distance to market and farm-gate prices of staple beans in rural Nicaragua," 2015 Conference, August 9-14, 2015, Milan, Italy 211582, International Association of Agricultural Economists.
  • Handle: RePEc:ags:iaae15:211582
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    Keywords

    Producer prices; Central America; Transactions costs; transportation infrastructure; Agribusiness; Farm Management; Financial Economics; O13; O18; Q11;

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices

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