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How Does a Shorter Supply Chain Affect Pricing of Fresh Food? Evidence from a Natural Experiment

Author

Listed:
  • Cevriye Aysoy
  • Duygu Halim Kirli
  • Semih Tumen

Abstract

The market for fresh food is often characterized by a large number of intermediaries delivering the product from the farmer to the retailer. The existence of these intermediaries, especially the informal ones, is often claimed to introduce market frictions that push fresh food prices up. We test the hypothesis that scaling down these frictions reduces the level of prices. Our data come from a policy reform in Turkey concerning the supply chain regulations in the market for fresh fruits and vegetables. Starting from January 1st, 2012, a new law is enacted (i) to remove informal intermediaries, (ii) to reduce the farmers' cost of access to formal intermediaries such as wholesale market places, and (iii) to provide the farmers with the option to directly sell their products to retailers�bypassing the wholesale intermediaries. This policy reform resembles a natural experiment that exogenously reduces the supply chain barriers in the market for fresh fruits and vegetables. Using quasi-experimental methods, we show that the policy reform has strikingly reduced the prices in the wholesale market. We also provide some rough evidence that there is no price effect in the retail market, which suggests that part of the wholesale markups may have been transferred to the retailers. Taken at face value, these results provide some hints that consumers have not received any direct benefits from the reform�ignoring the general equilibrium effects.

Suggested Citation

  • Cevriye Aysoy & Duygu Halim Kirli & Semih Tumen, 2015. "How Does a Shorter Supply Chain Affect Pricing of Fresh Food? Evidence from a Natural Experiment," Working Papers 1528, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  • Handle: RePEc:tcb:wpaper:1528
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    Cited by:

    1. Bo Yan & Jiwen Wu & Zijie Jin & Shiyou He, 2020. "Decision-making of fresh agricultural product supply chain considering the manufacturer’s fairness concerns," 4OR, Springer, vol. 18(1), pages 91-122, March.
    2. Mejía, Gonzalo & García-Díaz, César, 2018. "Market-level effects of firm-level adaptation and intermediation in networked markets of fresh foods: A case study in Colombia," Agricultural Systems, Elsevier, vol. 160(C), pages 132-142.

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    More about this item

    Keywords

    Supply chain reform; Fresh food prices; Incomplete pass-through; Quasi-experimental design.;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy

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