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  5. Improving Agricultural Input Markets in Developing Countries: Market Efficiency and Entrepreneurial Dynamics
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Improving Agricultural Input Markets in Developing Countries: Market Efficiency and Entrepreneurial Dynamics

Paper Session

Sunday, Jan. 5, 2025 1:00 PM - 3:00 PM (PST)

Hilton San Francisco Union Square
Hosted By: Agricultural and Applied Economics Association
  • Chair: Jeremy Foltz, University of Wisconsin-Madison

Sample Selection and Yield Resilience after Adopting New Seeds: Evidence from Recruitment at Agrodealers in Guatemala

Jess Rudder
,
University of Chicago

Abstract

Improved seeds that target smallholder farmers often exhibit considerable variation in yields once farmers adopt them, due to differences in input choices, soil quality, and weather. The extent of heterogeneity has implications for policies that support new seed development because it is important to learn which seeds have robust yields across a variety of circumstances. Further, when promoting new seeds there is a debate about whether to sell them to farmers via market intermediaries such as agricultural input sellers (agrodealers) or to provide them at a discount to encourage experimentation. I compare yield resilience to weather shocks for two samples of farmers that participated in detailed plot-level harvest using crop cuts (a method that improves precision on yield estimates) in Guatemala. One sample of participants was recruited after they opted into purchasing a hybrid, biofortified maize seed at agrodealer shops and the second was recruited after receiving a seed donation from an NGO.

Competition and Quality in Rural Markets: Evidence from Kenya

Joshua W. Deutschmann
,
University of Chicago
Timothy Njagi
,
Tegemeo Institute
Felipe Parra Escobar
,
University of Wisconsin-Madison
Emilia Tjernström
,
Monash University

Abstract

We study the influence of market entry by a social enterprise on incumbent firm behavior, market dynamics, and product quality in rural Kenyan markets. Our field experiment randomizes the timing of the social enterprise's store openings to estimate the causal impact on existing businesses. Our results reveal that the increase in competition prompts local firms to sell higher-quality products with no detectable effect on prices. These impacts are concentrated at the lower end of the product quality spectrum and spatially close to the new entrant. Our data allow us to examine several dimensions of firm behavior. We find that incumbent stores respond to the new entrant by diversifying their suppliers, extending their product ranges, and providing their customers with special offers.

Optimistic Entrepreneurs: Agri-Dealer Exit and Consumer Impacts in Tanzania

Alix Naugler
,
Cornell University
Sarah Janzen
,
University of Illinois
Hope Michelson
,
University of Illinois

Abstract

Sub-Saharan Africa has 44 million formal micro-, small-, and medium-enterprises (MSMEs) (International Finance Corporation, 2017). MSMEs—which largely operate in the informal sector—employ 80 percent of Africa’s workforce (Rajagopaul et al., 2020). These firms represent a catalyst for rural market development and are a critical source of non-farm income-generating activities for poor households. This paper analyzes firm dynamism (i.e., entry and exit rates) among agri-dealers in Tanzania’s Morogoro Region, the country’s agricultural hub. Understanding MSME dynamism can inform interventions that improve the survival and success of MSMEs in low-income countries. Such interventions could raise MSME owner and employee profits and expedite economic growth—especially in rural areas. We make three primary contributions to the literature on MSMEs in low-income countries: First, we show that the agri-dealer sector exhibits high levels of firm dynamism. The rates we observe are substantially higher than those observed for MSMEs in other sectors in low-income countries. Second, we explore reasons for high entry and exit rates and present evidence that agri-dealers are optimistic entrepreneurs operating in a highly competitive market. Finally, we document the implications of high firm dynamism for small-holder farmers. This paper is relevant to economists interested in development, industrial organization, and agribusiness. Though we focus on a specific region in Tanzania, results have broader implications, particularly in markets characterized by household entrepreneurship and small-holder farmer technology adoption.

Discussant(s)
Jeremy Foltz
,
University of Wisconsin-Madison
JEL Classifications
  • A1 - General Economics