Is the local wheat market a ‘market for lemons’? Certifying the supply of individual wheat farmers in Ethiopia

The impact of the use of new technologies on farmers’ wheat yield in Ethiopia: evidence from a randomized control trial

Banawe Plambou Anissa, Gashaw Abate, Tanguy Bernard and Erwin Bulte

European Review of Agricultural Economics, 2021, vol. 48, issue 5, 1162-1186

Abstract: Bulking and mixing of smallholder supply dilutes incentives to supply high quality. We introduce wheat ‘grading and certification shops’ in Ethiopia and use an auction design to gauge willingness-to-pay (WTP) for certification. Bids correlate positively with wheat quality, and ex ante notification of the opportunity of certification improves wheat quality. These findings suggest that local wheat markets resemble a ‘market for lemons’, crippled by asymmetric information. However, aggregate WTP for grading and certification services does not re-coup the sum of fixed, flow and variable costs associated with running a single certification shop.

Keywords: certification; quality production in agriculture; value chain upgrading; lemons (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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