An analysis of the dynamics of two high-value export chains: smallholder participation, standards and trust

Globalization and growing demand for high-quality food have facilitated and increased international trade in food products and at the same time opened up new and promising business opportunities for farmers worldwide. Given this trend, the expansion of smallholders´ income opportunities through their participation in high value chains been promoted as a promising measure to promote rural economic growth and contribute to poverty reduction. Different studies conclude that the access to these new markets has a positive impact on rural welfare either through product or labor markets (Maertens and Swinnen 2009; Bellemare 2012; Minten et al. 2009). However, overcoming the initial constraints and gaining access to the export market may not be sufficient to guarantee sustained benefits from market participation in the long run. Constructing a sustainable marketing relationship also depends on whether both actors fulfill the terms of the contract and on the relational capital that is built through the interactions. This dissertation is an empirical analysis of the dynamics of two small farmers´ high value chains supplying the export market and how they are affected by transaction risks. It is based on the study of two cases: broccoli in Ecuador and pineapple in Costa Rica. Both cases represent typical agricultural value chains for fresh products characterized by vertically coordinated agribusiness producing for the export market and with high quality requirements. First, an analysis of the extent of broccoli smallholders´ participation in the export market over an 11-year time period using correlated random effects and diff-GMM models is conducted. Jointly, the hazards of dropping out of the export chain based on a multi-spell cox duration model are also estimated (chapter two). In a second study, an artefactual framed field experiment with prior signaling is played with a sub-sample of 180 broccoli farmers to explore the effect of opportunistic behavior on their trust. Finally, a third approach uses data from a household survey conducted with pineapple growers in Costa Rica and analyzes the determinants of contract choice and the dynamics of standard adoption. An evaluation of the effects of different market arrangements on pineapple revenues, transaction risks and relational capital is also carried out. The thesis concludes by summarizing the main results of this work and its contribution to the literature in the field of rural development. Policy recommendations are also developed in an attempt to contribute with propositions that could improve the current state of agribusinesses and achieve more stable relations between small farmers and exporting firms