Impact of Third‐Party Contract Enforcement in Agricultural Markets—A Field Experiment in Vietnam

19 Pages Posted: 15 Apr 2020

See all articles by Christoph Saenger

Christoph Saenger

affiliation not provided to SSRN

Maximo Torero

International Food Policy Research Institute (IFPRI)

Matin Qaim

University of Goettingen (Gottingen)

Date Written: July 2014

Abstract

We study the effect of alleviating the information asymmetry regarding product quality that is widespread in contracts between agricultural producers and buyers in developing countries. Opportunistic buyers may underreport quality levels to farmers to reduce the price that they have to pay. In response, farmers may curb investment, thereby negatively affecting farm productivity. In an experiment, we entitle randomly selected smallholder dairy farmers in Vietnam, who are contracted by a large company, to independently verify milk testing results. Results indicate that treatment farmers use 12% more inputs, and they also increase their output significantly. Some wider research and policy implications are discussed.

Keywords: Contract farming, dairy production, developing countries, randomized controlled trial, information asymmetry, output quality, Vietnam

Suggested Citation

Saenger, Christoph and Torero, Maximo and Qaim, Matin, Impact of Third‐Party Contract Enforcement in Agricultural Markets—A Field Experiment in Vietnam (July 2014). American Journal of Agricultural Economics, Vol. 96, Issue 4, pp. 1220-1238, 2014, Available at SSRN: https://ssrn.com/abstract=3574172 or http://dx.doi.org/10.1093/ajae/aau021

Christoph Saenger (Contact Author)

affiliation not provided to SSRN

Maximo Torero

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

Matin Qaim

University of Goettingen (Gottingen) ( email )

Platz der Gottinger Sieben 3
Gottingen, D-37073
Germany

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