Stability of contracts in the Brazilian wine industry

Decio Zylbersztajn and Marcelo Miele

Brazilian Journal of Rural Economy and Sociology (Revista de Economia e Sociologia Rural-RESR), 2005, vol. 43, issue 2, 19

Abstract: A variety of contracts between wineries and grape growers are observed in Brazil. This study addresses the concept of coordination of food chains, particularly the stability of contractual relationships. A qualitative analysis of industry-farmers contracts is presented, followed by a quantitative analysis testing transaction cost economics-based hypothesis. Scale, location, age of vineyard, and the cooperative organizational form are addressed in terms of the effect on the stability of contracts. Vertical and horizontal coordination are addressed. Data come from a sample of 139 grape-growers that supplied 10 major wineries. The results show that more stable contracts or vertical integration are characteristic of high quality wine production, where the need for strict contractual coordination is more relevant, i.e. risk of hold up losses is larger. We test the hypothesis that site specificity and quality-related specific investments are associated with more stable contractual architectures. Farmers' cooperatives present poorer performance but tend to hold more stable relationships with their members, possibly the result of adverse selection, since specialized farmers prefer to maintain contracts with investor-owned wineries, instead of farmers' cooperatives. Conclusions are presented in the final part.

Keywords: Agribusiness (search for similar items in EconPapers)
Date: 2005
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://ageconsearch.umn.edu/record/156207/files/a08v43n2.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:rdecag:156207

DOI: 10.22004/ag.econ.156207

Access Statistics for this article

More articles in Brazilian Journal of Rural Economy and Sociology (Revista de Economia e Sociologia Rural-RESR) from Sociedade Brasileira de Economia e Sociologia Rural Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().