Title: Supply Chain Coordination and Rural Development
Other Titles: Ketencoördinatie en rurale ontwikkeling
Authors: Verhofstadt, Ellen
Issue Date: 10-Mar-2014
Abstract: Institutional innovations in food value chains are shaping and affecting the way food is produced and traded in developing countries. There is, however, no consensus yet on the overall welfare implications. The work in this dissertation is built on case studies in Rwanda and Senegal. We focus on vertical and horizontal coordination processes in food supply chains and address three main research gaps. Doing so, we increase the understanding of the multiple dimensions of food value chains, their performance and their development implications. First, few studies have looked at the indirect effects of increased rural employment in (export) food value chains. Empirical studies mostly focused on the inclusiveness and effectiveness of vertical coordination schemes, especially with regard to contract farming. However, as there is a global trend of increased vertical integration, labor market effects become more important. In chapter 2, we consider a case study in Senegal and analyze the indirect effect of the boom in horticultural exports and the related increase of rural employment on child schooling. The export boom has caused a dramatic increase in female off-farm wage employment in the export companies, which led to increased female bargaining power in the household. We investigate the causal effect of female wage income on primary school enrolment. We develop a collective household model with endogenous bargaining power to show that, if women have higher preferences for schooling than men, the impact of female wage income on school enrolment will be the result of a positive income effect, a negative labor substitution effect and a positive empowerment effect. We also address the question empirically and show that female off-farm wage income has a positive effect on primary school enrolment. For example, female wage employment increases the likelihood of primary school aged children to be enrolled in school with 26% points, an effect that is found to be equally large for both boys and girls. Further, we demonstrate that female empowerment is specifically important for the schooling of girls. Second, the existing literature mostly focuses on higher-value and global food supply chains, either export chains or chains dominated by FDI and large supermarkets. However, the landscape of food value chains is more diverse than the typical dichotomous distinction between so called ‘modern’ and ‘traditional’ food value chains. In chapter 3, we conduct a value chain analysis of horticultural value chains in Rwanda. We show that a wide variety of horticultural supply chains exist in the country and argue that value chains can be differentiated beyond the current dichotomy of global (modern) chains versus local (traditional) chains. Processes of modernization, especially value-adding, quality and product differentiation and vertical coordination, also take place in domestic and local chains. Third, in the context of food value chains the effects of horizontal coordination processes at producer level resulting in the establishment of professional producer cooperatives, have rarely been analyzed. In chapter 4, we analyze the direct effects of participation in cooperatives on the agricultural performance of rural households in Rwanda. Agricultural policies in Rwanda focus on agricultural intensification and increased market orientation of the smallholder farm sector. Cooperatives are seen as key vehicles in this, but little is known about their effectiveness to achieve these goals. Unlike most impact studies that focus on a single cooperative or on multiple cooperatives in a single sub-sector, we explicitly look at the diversity in cooperatives and analyze the role of cooperative structure and organizational differences to explain impact heterogeneity across different cooperatives. We use cross-sectional household data, collected in 2012, to analyze the impact of cooperative membership on different agricultural performance indicators, including indicators on agricultural intensification, market orientation, farm revenue and income. We use several econometric techniques to deal with potential selection bias in estimating the impact of cooperative membership, including a proxy variable method based on a willingness-to-pay-measure and propensity score matching methods. We find that cooperative membership in general has a positive impact on different farm performance indicators. Participation in a cooperative improves market orientation as it increases the share of farm produce sold with 10 to 16% points. Cooperative membership also results in increased agricultural intensification as it increases the value of inputs used with 6 to 8.6 thousand RWF, and the likelihood of using improved seeds, mineral fertilizer, pesticides and irrigation increases with about 21 to 31% points. Cooperative membership further increases gross farm revenue with 37% and net farm income with 25%. However, these effects are driven by specific types of cooperatives. We find the largest effects for cooperatives in which farmers’ incentives are least distorted, i.e. cooperatives that focus on joint input acquisition and marketing and cooperatives in which remuneration is individually based. We find no effects for cooperatives that focus on joint production and for cooperatives without individual remuneration. In chapter 5, we use the Rwandan case study and analyze both inclusiveness and effectiveness of agricultural cooperatives. We estimate mean income and poverty effects of cooperative membership using propensity score matching techniques. Unlike most impact studies, we look beyond the mean effects and evaluate impact heterogeneity. We analyze heterogeneous treatment effects across farmers by analyzing how estimated treatment effects vary over farm and farmer characteristics and over the estimated propensity score. We find that cooperative membership in general increases income and reduces poverty. We find that farm income increases with about 40 to 45% and total household income with about one fifth to one fourth, and that the likelihood of being poor reduces with 10 to 14% points. We further find that these effects are largest for larger farms and in more remote areas. We find evidence of a negative selection as the impact is largest for farmers with the lowest propensity to be a cooperative member.
ISBN: 978-90-8826-355-2
Publication status: published
KU Leuven publication type: TH
Appears in Collections:Division of Bioeconomics

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