Contracting Institutions, Agro‐food Trade and Product Quality

Abstract

The agro-food sector has experienced a profound transformation of contractual arrangements along the value chain, coinciding with important technological innovations and product quality upgrading. Our understanding of the impact that this transformation has had on trade flows in the agricultural sector is very limited. In particular, we have limited knowledge about the extent to which the patterns in agro-food trade have been driven by the quality of contractual institutions. Using existing measures which capture the sensitivity of agro-food products to contractual imperfections, we show that countries with better contract enforcement specialise in the production of food which requires higher level of relationship-specific investments. We also find that countries with better contracting institutions and producing contract-intensive goods specialise in exporting high quality foods. In addition, we show that the quality of contracting institutions might importantly affect the process of product quality upgrading.

Impact of the institutional quality on NAFTA's international trade: a system GMM approach

“…First, bilateral trade can affect institutional quality (Crumley, 2013;Hochman et al, 2013). This phenomenon is called reverse causality (Fałkowski et al, 2018;Karam and Zaki, 2018), which is a potential source of endogeneity. Second, the appearance of the lagged dependent variable (InTrade ij, tÀ1 ) in the right-hand side of the equation can result in a correlation between that variable and the error term.…”

Risk pooling cooperative games in contract farming

“…The second group of literature focuses on the contract farming in agricultural production. There are a number of studies on the application of contract farming in agriculture; see Bellemare and Novak (2017), Wu (2014), and Fałkowski, Curzi, and Olper (2019) for reviews on contract farming. Under contract farming, the farmer enters into a contract with a buyer to sell the harvest before the beginning of the selling season.…”

Trust, Efficient Contracting and Export Upgrading

“…Whereas the above studies focus mainly on economic factors, few studies have also analyzed the role of socioeconomic factors such as institutional quality (Faruq 2011;Essaji and Fujiwara 2012;Falkowski et al 2019). The theoretical underpinning of these studies is based on the transaction cost theory wherein poor institutional quality proliferates uncertainties about the circumstances in which producers and final good producers could operate and collaborate to produce the optimal output.…”

“…More recently, socioeconomic factors such as institutional quality are gaining traction in the literature (Faruq 2011;Essaji and Fujwara 2012;Falkowski et al 2019). Notably, this literature argues that upgrading product quality often requires producers to source inputs or technologies outside a firm's boundary or collaborate with multiple parties.…”