The Enforcement of Traditional Vegetable Marketing Contracts in the Eastern and Central Parts of Ethiopia

Jema Haji

Journal of African Economies, 2010, vol. 19, issue 5, 768-792

Abstract: This study investigates the enforcement of traditional vegetable marketing contracts between producers and traders in Ethiopia using the general conceptual framework of contract enforcement extended to capture the payment at risk. Empirical results show that despite its imperfections, compliance with contractual obligations is mainly due to mutual trust and brokers' mediation. Moreover, results demonstrate the necessity of contractual arrangements that guarantee flexibility without exposing trading partners to the risks of opportunism. A separate analysis of contract enforceability through brokers reveals that farmer's age, whether a buyer is a trader, information access and trader-specific investment have a significant positive impact while family size, frequency of transactions, dependency on the trader, duration of the relationship and distance to the trader have a significant negative impact on contract enforceability through brokers. Furthermore, pooled multinomial Logit regression analysis show that traders' non-compliance to contractual obligations are mainly due to the risks related to perishability, seasonality, illiteracy and his type. An effective enforcement of vegetable marketing contracts in the study areas may be achieved through governmental and/or private institutions interventions that target market information access, development of cooperatives and associated support programmes. Copyright 2010 The author 2010. Published by Oxford University Press on behalf of the Centre for the Study of African Economies. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org, Oxford University Press.

Date: 2010
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