Access to Information, Transaction Costs and Marketing Choice of Rural Households between Middlemen and Direct Buyers in Bangladesh

This paper assesses the impact of information cost and other transaction costs on rural producers' discrete choice between selling to middlemen and direct buyers, and continuous choice of selling intensity to middlemen and direct buyers. Using transaction costs economics as an analytical framework to decompose the different origins of transaction costs, the paper empirically investigates the impact of transaction costs on farm households' marketing behaviour in the context of Bangladesh. Empirical findings of this paper suggest that access to information in the form of access to telephone and other form of transaction costs play a significant role in producers' marketing behaviour. For information cost, a unit change in distance to telephone increases the probability of choosing direct buyer over middlemen by more than 4 percent and sales to direct buyer by more than 8 percent.

ACCESS TO INFORMATION AND FACTOR MARKET PARTICIPATION: ADJUSTMENTS OF LAND AND LABOUR MARGINS OF AGRICULTURAL HOUSEHOLDS IN BANGLADESH

This paper assesses the impact of access to information on farm household's factor market participation. The paper tries to answer two questions. First, does use of telephone have any impact on farm household's factor market participation decision? Second, correcting for market participation, does use of telephone have any impact on the type of factor adjustment decision? For the first question, the paper uses a bivariate probit to correct for omitted variable bias and for the second question, the paper uses a two stage probit. Empirical findings of this paper suggest that access to information in the form of use of telephone has significant positive impact on factor market participation. The difference in market participation between telephone users and nonusers is around 14 percent. However, once a household participate in the market, the use of telephone does not have any impact on specific factor market participation.Consumer/Household Economics, Marketing,

Use of ICTs and the Economic Performance of SMEs in East Africa

This paper assesses the use of information and communication technologies (ICTs) and their impact on the economic performance of small- and medium-scale enterprises (SMEs) of three East African countries: Kenya, Tanzania and Uganda. Findings of the paper suggest that the diffusion of ICT among East African SMEs is both industry and country specific. The empirical findings suggest that investment in ICT has a negative impact on labour productivity and a positive impact on general market expansion. However, such investment does not have any significant impact on enterprises’ return, nor does it determine enterprises exporter (non-exporter) status.information and communication technology, small and medium enterprises, firm performance, market expansion, East Africa

Use of ICTs and the Economic Performance of SMEs in East Africa

determinants of aid efforts, generosity, ODA, DAC, donors, G7

Market institutions

This paper examines how market institutions can affect links between urban and rural areas with specific emphasis on goods market integration in the national context.Traditionally, development researchers and practitioners have focused either on rural market development or on urban market development without considering the interdependencies and synergies between the two. However, more than ever before, emerging local and global patterns such as the modern food value-chain led by supermarkets and food processors, rapid urbanization, changes in dietary composition, and enhanced information and communication technologies point to the need to pay close attention to the role of markets both in linking rural areas with intermediate cities and market towns and promotion of economic development and poverty reduction. This paper begins with a presentation of a conceptual framework of market integration and then identifies five major factors that increase the transfer costs that subsequently hinder market integration between rural and urban areas: information asymmetry, transaction costs, transport and communication costs, policy induced barriers, and social and noneconomic factors. Five specific cases in five developing countries are examined in this study to demonstrate the primary sources of transfer costs and the aspects of market institutions that are important to market integration and promotion of rural-urban linkages.Rural-urban linkages ,

Spatial coordination in public good allocation: Nonparametric evidence from decentralized Indonesia

"This paper examines dynamics in public good accessibility and cross-community inequality in Indonesia, using village-level panel data from 2000 to 2006 from their decentralized public-good allocation system. The introduction of decentralization makes public-good investment dependent on initial local income and endowment, and makes it difficult to coordinate investment decisions across communities. Our analysis also shows that possible strategic interactions among communities connected with transportation infrastructure (externalities) implies spatial divergence. Empirical evidence on education and heath facilities, however, demonstrates that during the decentralized period, (1) accessibility to school has improved and school investments were effectively coordinated over space; (2) hospital access has improved only marginally; but (3) per-capita availability of schools and local medical clinics (puskesmas) in the community shows convergence toward low-level equilibria. Despite the coordination in spatial allocation even in the decentralization period (observed in intervillage accessibility), endogenous population mobility and growth partially cancel the benefits of the coordinated efforts in public-good allocation. This point requires further policy attention." from Authors' AbstractPublic goods, Education, health, Spatial coordination, Poverty dynamics,

High value products, supermarkets and vertical arrangements in Indonesia

" Indonesian economy has experienced some major changes during the last three decades and transformed from a predominantly agricultural economy to one that relies more heavily on its non-agricultural sector. Within agriculture, there has also been a change in the contribution of different sub sectors and high value products have grown relatively rapidly making agriculture more diversified. Similar to the changes in agricultural production, food consumption in Indonesia has shown a pattern of change over the past three decades, from a diet characterized primarily by the staple foods of cereals and cassava, to one that includes a larger share of fruits, fish, meats, dairy products and processed foods. Alongside the change in composition of food demand, newer forms of retail have also come up commonly known as supermarkets. However, the emergence of modern retailing has other consequences that go beyond consumers. It requires deep integration with farmers and can influence the production and transaction costs at farm level. It can also influence the distribution of value among different agents involved in production, intermediation, and retailing. In this paper we pursue three interrelated objectives. First, we review the structural changes that have taken place in Indonesian agriculture for the last three decades and the state of high value products. Second, we examine the driving forces behind the production of high value products and the constraints that limit their production. Third, we review the emergence of supermarkets and the vertical arrangements among farmers, traders/distributors, and supermarkets. We have relied both on primary and secondary data sources. Most of the secondary data has come from government directorates, different ministries and the central bureau of statistics (CBS) of the Government of Indonesia. In cases where secondary information was not readily available, we have also collected primary data. Our findings suggest that during the last three decades, there has been a significant structural change in Indonesian agriculture and the production of high value commodities and products –estate crops, livestock, fisheries, fruits and vegetables, and floriculture – has grown faster than the cereals. However, the extent of diversification towards high value products has remained limited to few regions and to few products within each sub sector. Factors that have contributed most in diversification are the rapid growth in income and accompanied changes in urban consumption in favor of high value products and agricultural mechanization. The economic crisis that was triggered by the currency crisis has had a long negative impact on agriculture sector. Structural changes in Indonesian agriculture have been accompanied by changes in consumption pattern in urban areas in favor of high value products and by a major change in retailing in the form of growth of modern supermarkets. To cater to the demand of changed urban consumption needs, supermarkets have been integrating with farmers through formal and informal contracts. This vertical relationship between farms and supermarkets that has been emerging in Indonesia has been helpful to follow grades and standards, to improve quality, and to reduce transaction costs and information asymmetries. It has also been helpful to reduce price and production risks at farm level and to ensure a higher price for farmers compared to traditional value chain. However, it seems that the participation of small holders in the vertical relationship depends largely on vendors. Within the vertical chain, supermarkets appropriate a monopsony rent. Important policies that can be drawn from this study are the greater emphasize on rural infrastructure, user right of state-owned estate to smallholders, promotion of public-private partnerships, encouragements of vertical arrangements, grades and standards, and bringing up the modern retailing sector under the purview of regulatory oversights." Authors' AbstractDiet ,High value agricultural products ,Supermarkets ,

Migrating Away from a Seasonal Famine: A Randomized Intervention in Bangladesh

The rural northwestern districts of Bangladesh, home to 10 million people, experience a preharvest seasonal famine, locally known as Monga, with disturbing regularity. Surprisingly, outmigration from the Monga-prone districts is not all that common. This research tests whether migration could play any role in Monga mitigation. We implemented a randomized intervention that provided monetary incentives to individuals in Monga-prone regions to seasonally outmigrate during the pre-harvest season. We experimentally varied the conditionalities attached to the incentives, such as a requirement to form a group and migrate jointly (as opposed to migrating individually), sometimes assigning migration partners and the destination, and varying group size. This paper reports just the first stage results of this randomized intervention project, where we focus on household responsiveness to our incentive offers in terms of their decision to migrate. Our cash and credit incentives had a very large effect on migration propensity: over 40% of those receiving an incentive choose to migrate, whereas only 13% of control households do. This large effect is consistent with the presence of savings or borrowing constraints for these households, since providing information on wages and employment conditions at destinations only has a negligible 2 percentage point impact on the propensity to migrate relative to the control group.Monga, famine, Bangladesh, migration

Migrating Away from a Seasonal Famine: A Randomized Intervention in Bangladesh

The rural northwestern districts of Bangladesh, home to 10 million people, experience a preharvest seasonal famine, locally known as Monga, with disturbing regularity. Surprisingly, outmigration from the Monga-prone districts is not all that common. This research tests whether migration could play any role in Monga mitigation. We implemented a randomized intervention that provided monetary incentives to individuals in Monga-prone regions to seasonally outmigrate during the pre-harvest season. We experimentally varied the conditionalities attached to the incentives, such as a requirement to form a group and migrate jointly (as opposed to migrating individually), sometimes assigning migration partners and the destination, and varying group size. This paper reports just the first stage results of this randomized intervention project, where we focus on household responsiveness to our incentive offers in terms of their decision to migrate. Our cash and credit incentives had a very large effect on migration propensity: over 40% of those receiving an incentive choose to migrate, whereas only 13% of control households do. This large effect is consistent with the presence of savings or borrowing constraints for these households, since providing information on wages and employment conditions at destinations only has a negligible 2 percentage point impact on the propensity to migrate relative to the control group.Monga, famine, Bangladesh, migration

The Rise of Supermarkets and Vertical Relationships in the Indonesian Food Value Chain: Causes and Consequences

This paper reviews the causes of the emergence of modern retailing and the vertical relationships in the Indonesian food value chain, and the consequences of these changes on market organization and value distribution. The findings of this paper suggest that there are both demand- and supply-side factors that contribute to the emergence of modern retailing. The evolution of vertical relationships between farmers and modern retailers observed in Indonesia is a direct response to risks and quality uncertainty. In the vertical relation, large-scale retailers may earn a monopsonistic rent, and there are risks of exclusion of small-scale farmers from the emerging food value chain. However, there are alternative channels through which farmers may sell their products, albeit at a lower price compared to the modern channels, and measures can be instituted to protect them against monopsonistic rents. The findings have important policy implications for developing countries.supermarkets, retailing, Indonesia, food value chain