Article ID Journal Published Year Pages File Type
989225 World Development 2011 13 Pages PDF
Abstract

SummaryHigh-value export supply chains hold potential to improve smallholders’ welfare, but their relative production inefficiency and moral hazard problems can cause exporters to prefer vertically integrated plantation production. However, pineapple exporters in Ghana produce both for their own account and purchase from smallholders. We hypothesize that vertical integration is only partial because exporters face large market risks that smallholders, surprisingly, are better able to absorb. We show empirically that exporters’ average rejection rate of export-quality fruit is high and varies in response to unanticipated fluctuations in European demand. These results support the hypothesis and are consistent with theories of partial vertical integration but not the standard principal-agent paradigm.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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