Quality Upgrading in Global Supply Chains: Evidence from Colombian Coffee

Rocco Macchiavello (), Josepa Miquel-Florensa (), Nicolás de Roux, Eric Verhoogen (), Mario Bernasconi () and Patrick Farrell ()
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Rocco Macchiavello: University of Warwick
Josepa Miquel-Florensa: Toulouse School of Economics
Eric Verhoogen: Columbia University
Mario Bernasconi: University of Basel
Patrick Farrell: Columbia University

No 18335, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Do the returns to quality upgrading pass through supply chains to primary producers? We explore this question in the context of Colombia’s coffee sector, in which market outcomes depend on interactions between farmers, exporters (which operate mills), and international buyers, and contracts are for the most part not legally enforceable. We formalize the hypothesis that quality upgrading is subject to a key hold-up problem: producing high-quality beans requires long-term investments by farmers, but there is no guarantee that an exporter will pay a quality premium when the beans arrive at its mills. An international buyer with sufficient demand for high-quality coffee can solve this problem by imposing a vertical restraint on the exporter, requiring the exporter to pay a quality premium to farmers. Combining internal records from two exporters, comprehensive administrative data, and the staggered rollout of a buyer-driven quality-upgrading program, we find empirical support for the key theoretical predictions. The results are consistent with the hypotheses that quality upgrading can provide a path to higher incomes for farmers, but also that it is unlikely to be viable under standard market conditions in the sector.

Keywords: buyer-driven voluntary standards; vertical restraints; relational contracts; quality upgrading (search for similar items in EconPapers)
JEL-codes: F61 L23 O12 Q12 Q13 (search for similar items in EconPapers)
Date: 2025-12
New Economics Papers: this item is included in nep-iaf and nep-int
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Related works:
Working Paper: Quality Upgrading in Global Supply Chains: Evidence from Colombian Coffee (2026)
Working Paper: Quality Upgrading in Global Supply Chains: Evidence from Colombian Coffee (2025)
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