Quality Contingent Contracts : Evidence from Tanzania's Coffee Market
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World Bank, Washington, DC
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The literature on product quality in
markets where product attributes are not readily observable
indicates that information asymmetries and incentive
problems may lead to the under-provision of quality. This
paper contributes to this literature by estimating the
effects of village-level contractual arrangements on
producer incomes and on quality enhancing production
practices. Three contract types are studied: spot contracts,
contingent contracts with product grading and contingent
contracts without product grading. To do this, the study
uses original data from a survey of 450 coffee producers in
Tanzania's coffee market that take advantage of
contractual variation in the Kilimanjaro region. The results
indicate that coffee contracts that include village-based
product grading have a large positive effect on producer
incomes, and that the grading effect is associated with
production practices that enhance quality. The results also
indicate that cooperative membership has no significant
effect on producer incomes.
Palabras clave
ACCESS TO MARKETS, AGRICULTURAL MARKETS, ANTITRUST, ANTITRUST IMPLICATIONS, ASYMMETRIC INFORMATION, AUCTION, BASIL, BUYER, CASH PAYMENT, COFFEE, COFFEE BEANS, COFFEE BOARD, COFFEE BUYERS, COFFEE CROP, COFFEE GROWERS, COFFEE MARKET, COFFEE PRODUCER, COFFEE PRODUCERS, COFFEE PRODUCTION, COFFEE SECTOR, COMMODITY, COMPETITIVE MARKET, CONTRACT FARMING, CONTRACT FARMING ARRANGEMENTS, CONTRACT PERFORMANCE, COOPERATIVE MARKETING, COOPERATIVES, CROP, CROPS, DATA ANALYSIS, DATA PROCESSING, DEVELOPING COUNTRIES, DUMMY VARIABLE, ECONOMIC DEVELOPMENT, ECONOMIC THEORY, ECONOMICS, EQUIPMENT, FAIR, FARM, FARMER, FARMERS, FERTILIZER, FOOD SECURITY, FREE PRESS, FREE RIDER PROBLEM, HOUSEHOLD INCOME, HUMAN DEVELOPMENT, IFPRI, INCENTIVE PROBLEMS, INFORMATION ASYMMETRIES, INSPECTION, INSTRUMENT, INTERNATIONAL BANK, INTERNATIONAL DEVELOPMENT, INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE, INTERNATIONAL MARKET, LOCAL GOVERNMENT, MARKET ECONOMY, MARKET FAILURE, MARKET REFORMS, MARKET SHARE, MARKETING, OPEN ACCESS, OPPORTUNITY COSTS, ORGANIC COFFEE, ORGANIC PRODUCTION, OUTPUTS, PESTICIDE, POLITICAL ECONOMY, PREMIUM PAYMENT, PRICE INCENTIVES, PRICE PREMIUM, PRODUCE, PRODUCER PRICE, PRODUCER PRICES, PRODUCT QUALITY, PRODUCTION PROCESSES, PRODUCTIVITY, PROPERTY RIGHTS, PURCHASING, QUALITY COFFEE, RENTS, RESULT, RESULTS, SALE, SALES, SMALL FARMERS, SPOT MARKET, SPOT MARKET TRANSACTIONS, SUPERMARKET, TOMATOES, TRANSACTION, TRANSACTION COST, TRANSACTION COSTS, TRANSMISSION, USES, VALUE CHAIN, VALUE CHAINS, WEB