The rise of agribusiness and the distributional consequences of policies on intermediated trade

Swati Dhingra and Silvana Tenreyro

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Policies to encourage agribusinesses-led development of crop markets are high on the agenda of many policy-makers. Since the 1980s, several countries have moved to a model in which agribusinesses provide market access to farmers. The motivation behind these policies is to raise income and wellbeing, particularly for low-income rural households. Yet, systematic analyses of the overall impact of such policies on household welfare are scant. This paper provides a novel modelling framework to study the role of agribusinesses in shaping the gains from trade and the share accruing to small farmers. Exploiting a national policy change in Kenya in 2004, we find that the shift to the agribusiness model reduced farmer incomes from policy-affected crops, relative to other crops. The relative fall in incomes was higher for farmers selling primarily to large agribusinesses. Correspondingly, agribusiness firms specialized in policy-affected crops saw larger increases in profit margins. Farmers in villages with a comparative advantage in policy-affected crops saw larger reductions in consumption, especially of durable assets. The findings contribute to the academic and policy debate on the impact of market power on the size and distribution of the gains from trade.

Keywords: agribusiness; market power; intermediated trade; middlemen; oligopsony (search for similar items in EconPapers)
JEL-codes: F1 O1 Q1 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2020-02-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://eprints.lse.ac.uk/108418/ Open access version. (application/pdf)

Related works:
Working Paper: The rise of agribusiness and the distributional consequences of policies on intermediated trade (2020)
Working Paper: The Rise of Agribusiness and the Distributional Consequences of Policies on Intermediated Trade (2020)
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