Do private standards create exclusive supply chains? New evidence from the Peruvian asparagus export sector

Developing countries are increasingly exporting fresh horticultural products to high-income countries. These exports increasingly have to comply with stringent public and private standards, as well as other quality and safety issues. There is an ongoing debate on the effect of private standards on the inclusion of small-scale farmers in export supply chains. With this paper, we contribute to this debate by providing new evidence from the Peruvian asparagus export sector, and by addressing several important methodological shortcomings and gaps in the existing literature. We describe export dynamics using a unique firm level dataset on 567 asparagus export firms from 1993 to 2011 and the evolution of certification to private standards using own survey data from a stratified random sample of 87 export firms. We use an unbalanced panel of the surveyed companies on 19 years and several methods, including fixed effects and GMM estimators, to estimate the causal impact of certification to private standards on companies' sourcing strategy. We find that certification leads to vertical integration and significantly reduces the share of produce that is sourced from external producers, with a larger effect for small-scale producers. When distinguishing between production and processing standards, and between low-level and high-level standards, we find that especially high-level production standards have a negative impact on sourcing from (small-scale) producers.