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Looking for Causes of Effects: Imperfect Contract Enforcement in Kenya's French Bean Market

Author

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  • Rosch, Stephanie
  • Ortega, David
Abstract
We introduce a fast and inexpensive method to rule out potential barriers to adopting a technology. We use this method to asses the role of exogeneous contract enforcement as a barrier to market for Kenya's French Bean export market. We survey 240 farmers in Kirinyaga County, Kenya who were specifically recruited as matching pairs of geographically-nearest neighbors. We use a choice experiment as our instrument to estimate the effect of imperfect contract enforcement on their intensive and extensive supply margins. Then we use the differences in choice experiment results between matched pairs to rule out forces which are not serving as barriers to entry in this market. We find that imperfect contract enforcement impacts the extensive supply margin by deterring entry and sparking exit from the market, and reduces the amount of land allocated to French bean production on the intensive margin. We also find that underlying heterogeneity in farmers' costs to provide high quality French beans does not impact the overall decision to supply export markets. It does, however, determine whether the contracting farmer self-selects between supplying the fresh and processed export markets. These findings can help explain why previous development interventions to connect small-scale producers to these markets were not successful in the long-term, and suggest options for alternative policies better targeted to the issue of contract enforcement.

Suggested Citation

  • Rosch, Stephanie & Ortega, David, 2014. "Looking for Causes of Effects: Imperfect Contract Enforcement in Kenya's French Bean Market," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170553, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea14:170553
    DOI: 10.22004/ag.econ.170553
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    References listed on IDEAS

    as
    1. Hart, Oliver D & Moore, John, 1988. "Incomplete Contracts and Renegotiation," Econometrica, Econometric Society, vol. 56(4), pages 755-785, July.
    2. Jonathan Levin, 2003. "Relational Incentive Contracts," American Economic Review, American Economic Association, vol. 93(3), pages 835-857, June.
    3. Julius J. Okello & Scott M. Swinton, 2007. "Compliance with International Food Safety Standards in Kenya's Green Bean Industry: Comparison of a Small- and a Large-scale Farm Producing for Export," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 29(2), pages 269-285.
    4. Barrett, Christopher B. & Bachke, Maren E. & Bellemare, Marc F. & Michelson, Hope C. & Narayanan, Sudha & Walker, Thomas F., 2010. "Smallholder Participation in Agricultural Value Chains: Comparative Evidence from Three Continents," MPRA Paper 27829, University Library of Munich, Germany.
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    Cited by:

    1. Ochieng, Dennis O. & Veettil, Prakashan C. & Qaim, Matin, 2017. "Farmers’ preferences for supermarket contracts in Kenya," Food Policy, Elsevier, vol. 68(C), pages 100-111.

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