Increasing Returns and Market Efficiency in Agricultural Trade
By Marcel Fafchamps, E. Gabre-Madhin, B. Minten. 2005
182 citations recorded by the source corpus.
Using detailed trader surveys in Benin, Madagascar and Malawi this paper investigates the presence of increasing returns in agricultural trade. After analyzing margins, costs, and value added, we find little evidence of returns to scale. Motorized transport is found more cost effective for large loads on longer distances. But transporter pool quantities from multiple traders. Margin rates show little relationship with transaction size. Personal travel costs are a source of increasing returns, but the effect is small. Consequently, total marketing costs are nearly proportional to transaction size. Working and network capital are key determinants of value added. Constant returns to scale in all accumulable factors - working capital, labour, and network capital - cannot be rejected. This implies that policies to restrict entry into agricultural trade are neither necessary nor useful. Governments should focus instead on technological and institutional innovations to upgrade agricultural markets.
Subfields: Economics and Econometrics, General Agricultural and Biological Sciences
View Paper: https://www.semanticscholar.org/paper/a285c4330f02d3ebd0583e14555769f9ca454057
How researchers see this paper
The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.
In Economics and Econometrics
- Ruth Vargas Hill
- Marcel Fafchamps
- Tavneet Suri
- L. Casaburi
- R. Glennerster
- B. Minten
- M. Qaim
- Esther Duflo
In General Agricultural and Biological Sciences
Citations in the corpus
- Mobile Phone Coverage and Producer Markets: Evidence from West Africa (2014, unknown): “The model is based on a fair but stylized description of how agricultural traders operate in sub-Saharan Africa (Fafchamps, Gabre-Madhin, and Minten 2005).”
- Rural Roads and Intermediated Trade: Regression Discontinuity Evidence from Sierra Leone (IGC Working Paper) (2012, background): “Agricultural markets throughout Sub-Saharan Africa are characterized by high levels of fragmentation and poor transport infrastructure, with intermediaries playing a central role (Fafchamps et al. (2004)).”
- Price Transmission and Trader Entry in Domestic Commodity Markets (2008, background): “736 economic development and cultural change cultural products, as is common in African agricultural trade (e.g., Fafchamps and Minten 1999; Fafchamps et al. 2005).”
- Selling at the farm-gate or travelling to market (2004, background): “In line with Fafchamps, Gabre-Madhin and Minten (2004) ,”