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

Dhingra, Swati ORCID: 0000-0001-5468-3415 and Tenreyro, Silvana ORCID: 0000-0002-9816-7452 (2020) The rise of agribusiness and the distributional consequences of policies on intermediated trade. CEP Discussion Papers (CEPDP1677). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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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.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information:	© 2020 The Author(s)
Divisions:	Economics
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HD Industries. Land use. Labor
JEL classification:	F - International Economics > F1 - Trade Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q1 - Agriculture O - Economic Development, Technological Change, and Growth > O1 - Economic Development
Date Deposited:	14 Jan 2021 14:18
Last Modified:	01 Nov 2024 04:58
URI:	http://eprints.lse.ac.uk/id/eprint/108418

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