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Market Structure, Vertical Integration and Farmers’ Welfare in the Costa Rica Coffee Industry

Author

Listed:
  • Fabrizio Leone
  • Rocco Macchiavello
  • Josepa Miquel-Florensa
  • Nicola Pavanini

Abstract

Widespread market imperfections in agricultural value chains raise the possibility that regulatory interventions may enhance efficiency and farmers’ welfare. We develop a structural model of agricultural value chains and estimate it using rich data from Costa Rica’s coffee sector to evaluate common regulations. Farmers supply differentiated mills that strategically decide which rural markets to source from and bilaterally bargain prices with downstream exporters. Through counterfactuals, our analysis highlights the nuanced, and potentially counter-productive, effects of commonly observed pro-competitive regulations on farmers’ welfare. Tightening revenue-sharing rules to increase farm-gate prices, increases farmers’ welfare on average but makes many worse off. Similarly, banning vertical integration raises farm-gate prices but harms most farmers by lowering valuable services provided by integrated mills.

Suggested Citation

  • Fabrizio Leone & Rocco Macchiavello & Josepa Miquel-Florensa & Nicola Pavanini, 2025. "Market Structure, Vertical Integration and Farmers’ Welfare in the Costa Rica Coffee Industry," CESifo Working Paper Series 11776, CESifo.
    • Handle: RePEc:ces:ceswps:_11776
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    References listed on IDEAS

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    1. Esther Duflo & Michael Kremer & Jonathan Robinson, 2008. "How High Are Rates of Return to Fertilizer? Evidence from Field Experiments in Kenya," American Economic Review, American Economic Association, vol. 98(2), pages 482-488, May.
    2. Tessa Bold & Kayuki C. Kaizzi & Jakob Svensson & David Yanagizawa-Drott, 2017. "Lemon Technologies and Adoption: Measurement, Theory and Evidence from Agricultural Markets in Uganda," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(3), pages 1055-1100.
    3. Ying Fan & Chenyu Yang, 2025. "Estimating Discrete Games with Many Firms and Many Decisions: An Application to Merger and Product Variety," Journal of Political Economy, University of Chicago Press, vol. 133(6), pages 1886-1931.
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    Cited by:

    1. Rocco Macchiavello & Josepa Miquel-Florensa & Nicolas de Roux & Eric Verhoogen & Mario Bernasconi & Patrick Farrell, 2025. "Quality Upgrading in Global Supply Chains: Evidence from Colombian Coffee," RFBerlin Discussion Paper Series 25167, ROCKWOOL Foundation Berlin (RFBerlin).

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    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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