Quality Contingent Contracts : Evidence from Tanzania's Coffee Market

The literature on product quality in markets where product attributes are not readily observable indicates that information asymmetries and incentive problems may lead to the under-provision of quality. This paper contributes to this literature by estimating the effects of village-level contractual arrangements on producer incomes and on quality enhancing production practices. Three contract types are studied: spot contracts, contingent contracts with product grading and contingent contracts without product grading. To do this, the study uses original data from a survey of 450 coffee producers in Tanzania's coffee market that take advantage of contractual variation in the Kilimanjaro region. The results indicate that coffee contracts that include village-based product grading have a large positive effect on producer incomes, and that the grading effect is associated with production practices that enhance quality. The results also indicate that cooperative membership has no significant effect on producer incomes.

Bibliographic Details

Main Author:	Mahdi, Shireen
Language:	English en_US
Published:	World Bank, Washington, DC 2012-08
Subjects:	ACCESS TO MARKETS, AGRICULTURAL MARKETS, ANTITRUST, ANTITRUST IMPLICATIONS, ASYMMETRIC INFORMATION, AUCTION, BASIL, BUYER, CASH PAYMENT, COFFEE, COFFEE BEANS, COFFEE BOARD, COFFEE BUYERS, COFFEE CROP, COFFEE GROWERS, COFFEE MARKET, COFFEE PRODUCER, COFFEE PRODUCERS, COFFEE PRODUCTION, COFFEE SECTOR, COMMODITY, COMPETITIVE MARKET, CONTRACT FARMING, CONTRACT FARMING ARRANGEMENTS, CONTRACT PERFORMANCE, COOPERATIVE MARKETING, COOPERATIVES, CROP, CROPS, DATA ANALYSIS, DATA PROCESSING, DEVELOPING COUNTRIES, DUMMY VARIABLE, ECONOMIC DEVELOPMENT, ECONOMIC THEORY, ECONOMICS, EQUIPMENT, FAIR, FARM, FARMER, FARMERS, FERTILIZER, FOOD SECURITY, FREE PRESS, FREE RIDER PROBLEM, HOUSEHOLD INCOME, HUMAN DEVELOPMENT, IFPRI, INCENTIVE PROBLEMS, INFORMATION ASYMMETRIES, INSPECTION, INSTRUMENT, INTERNATIONAL BANK, INTERNATIONAL DEVELOPMENT, INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE, INTERNATIONAL MARKET, LOCAL GOVERNMENT, MARKET ECONOMY, MARKET FAILURE, MARKET REFORMS, MARKET SHARE, MARKETING, OPEN ACCESS, OPPORTUNITY COSTS, ORGANIC COFFEE, ORGANIC PRODUCTION, OUTPUTS, PESTICIDE, POLITICAL ECONOMY, PREMIUM PAYMENT, PRICE INCENTIVES, PRICE PREMIUM, PRODUCE, PRODUCER PRICE, PRODUCER PRICES, PRODUCT QUALITY, PRODUCTION PROCESSES, PRODUCTIVITY, PROPERTY RIGHTS, PURCHASING, QUALITY COFFEE, RENTS, RESULT, RESULTS, SALE, SALES, SMALL FARMERS, SPOT MARKET, SPOT MARKET TRANSACTIONS, SUPERMARKET, TOMATOES, TRANSACTION, TRANSACTION COST, TRANSACTION COSTS, TRANSMISSION, USES, VALUE CHAIN, VALUE CHAINS, WEB,
Online Access:	http://documents.worldbank.org/curated/en/2012/08/16603775/quality-contingent-contracts-evidence-tanzanias-coffee-market https://hdl.handle.net/10986/12018
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