Supermarkets, Nicaragua, Horticulture, Small Farmers, Agribusiness, Community/Rural/Urban Development, International Development,

Hernandez, Ricardo

Perez, Francisco Jose

Reardon, Thomas

Wiegel, Jennifer

English

Research Papers in Economics

Supermarkets, Farm Assets, and Technology Choices: a Duration Analysis of 
Horticultural Growers in Nicaragua 
 
 
 
 
 
 
 
 
Ricardo Hernandez
1, Thomas Reardon
1, Francisco Perez
2 and Jennifer Wiegel
3 
1.  Department of Food, Agricultural, and Resource Economics, Michigan State University 
2.  Nitlapan Research Institute, Universidad Centroamericana UCA 
3.  University of Wisconsin-Madison 
hernan79@anr.msu.edu 
 
 
 
 
 
 
 
 
 
 
 
 
Poster prepared for presentation at the Agricultural & Applied Economics Association 2011 
AAEA & NAREA Joint Annual Meeting, Pittsburgh, Pennsylvania, July 24-26, 2011 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Copyright 2011 by Ricardo Hernandez, Thomas Reardon, Francisco Perez and Jennifer Wiegel.  All 
rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by 
any means, provided that this copyright notice appears on all such copies. Market participation has been 
recognized as a main driver of 
economic development  in rural 
areas of the world. Rural 
development has expanded 
market access and participation 
for small farm  
households, shifting from production of traditional/staple 
goods to horticultural goods for urban and foreign 
markets. 
However, not every smallholder who has been exposed to 
the opportunity of adoption decides to participate, and if 
they participate, many withdraw from markets after a 
short period of participation. 
Studies of the adoption of horticultural markets have 
commonly focused on the dichotomous decision of market 
participation by estimating limited dependent variable 
models, and without considering the dynamic nature of the 
adoption process. 
In addition, dichotomous models fail to examine the 
diffusion of market participation over time. Not all farm 
households who adopt new, presumably more profitable 
market channels (such as supermarkets) remain as 
suppliers of the new market over time.  
 
Introduction 
Ricardo Hernandez1, Thomas Reardon1, Francisco Perez2 and Jennifer Wiegel3 
1.  Department of Agricultural, Food and Resource Economics, Michigan State University 2. Nitlapan Research Institute, Universidad Centroamericana (UCA) 3.  University of Wisconsin 
In the first stage, we estimate a parametric hazard function with 
a Weibull distribution 
 
using the Accelerated Failure Time (AFT) model transformation 
for its simplicity to interpret results. 
 
 
 
Methods 
We estimate the smallholder’s  decision 
to adopt (and withdraw) from the 
supermarket channel using a hazard 
model framework, in which, the pre-
adoption and adoption spells are 
analyzed in relation to a set of time-
varying and time-invariant covariates. 
We use a panel constructed from a random sampled of tomato 
growers taken in 2004 and revisited in 2010. 
Implementation 
h(t)= !(x)
""t
"!1
log(t)= !'X +"#
 
 
Results 
On Adoption: 
v The effect of the lagged  traditional market price suggest 
that households are quite responsive to price changes, 
farmers tend to adopt late when the traditional market 
price is high. 
v Households with more nonfarm productive assets and 
with more labor dedicated to local off farm employment 
tend to adopt early, suggesting a link between income 
and market diversification. 
v Households with larger land 
     holdings are less interested in 
     adopt a new market channel. 
 
On withdrawal : 
v The effect of the lagged traditional market price is 
consistent with the previous results, by suggesting that 
households are more willing to withdraw from the 
supermarket channel if the price in the traditional market 
is high. 
v Age of the head, average education of the household and 
lagged nonfarm assets have positive effects on remaining 
as supermarket suppliers. 
v Lagged participation in cooperatives have a negative 
effect on the adoption spell. This effect is explained by 
taking into consideration the role of highly subsidized 
cooperatives formed by the sole purpose of supplying 
supermarkets, who failed as consistent suppliers once 
external support finished.  
 
Results 
The authors gratefully acknowledge support from the 
following institutions: 
v The USAID funded AMA CRSP  
v Nitlapan Research Institute 
v RIMISP 
v Ministry of Agriculture Nicaragua     
Acknowledgements 
Farm households are very sensitive to price changes, as 
fluctuations in the traditional price affects the household’s 
decision to adopt/withdraw from supplying supermarkets 
The results show a link between local nonfarm and market 
participation, suggesting that income diversification 
bolsters participation in modern markets. 
Conclusion 
Map of sampled 
Municipalities 
Objective 
 
 
 
 
 
 
 
 
 
 
that influence the decision to remain as supermarket 
suppliers in the future.  
We used a duration analysis 
approach to: 
1. Identify the determinants 
of participation in the 
supermarket channels by 
small tomato farmers in 
Nicaragua, and  
2. Once smallholders have 
adopted the supermarket 
channel, analyze the factors  

Supermarkets, Farm Assets, and Technology Choices: a Duration Analysis of Horticultural Growers in Nicaragua

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