Market Structure, Vertical Integration and Farmers’ Welfare in the Costa Rica Coffee Industry

Fabrizio Leone, Rocco Macchiavello, Josepa Miquel-Florensa and Nicola Pavanini

No 11776, CESifo Working Paper Series from CESifo

Abstract: Widespread market imperfections in agricultural value chains raise the possibility that regulatory interventions may enhance efficiency and farmers’ welfare. We develop a structural model of agricultural value chains and estimate it using rich data from Costa Rica’s coffee sector to evaluate common regulations. Farmers supply differentiated mills that strategically decide which rural markets to source from and bilaterally bargain prices with downstream exporters. Through counterfactuals, our analysis highlights the nuanced, and potentially counter-productive, effects of commonly observed pro-competitive regulations on farmers’ welfare. Tightening revenue-sharing rules to increase farm-gate prices, increases farmers’ welfare on average but makes many worse off. Similarly, banning vertical integration raises farm-gate prices but harms most farmers by lowering valuable services provided by integrated mills.

Keywords: agricultural chains; market structure; farmers’ welfare (search for similar items in EconPapers)
JEL-codes: L22 O12 Q13 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_11776

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