Returns to quality in rural agricultural markets: Evidence from wheat markets in Ethiopia
研究利用埃塞俄比亚60个小麦市场的独特数据，发现市场仅奖励无需成本即可观察到的质量属性，而不可观察的质量属性得不到价格溢价，且这一结果因市场特征而异。
In many Sub-Saharan countries, farmers cannot meet the growing urban demand for higher quality products. While the literature has focused on production-side constraints to enhance smallholder farmers’ output quality, there is scarce evidence of market-side constraints. Using a sample of 60 wheat markets in Ethiopia, I assess whether farmers received a price premium for supplying higher quality outputs. I exploit a unique feature of the data which precisely measures observable and less or unobservable quality attributes, and relate them to transaction prices. Observable attributes cannot serve as proxies for less observable ones. Transaction prices further reflect this, indicating that markets only reward quality attributes that are observable at no cost. However, these results hide cross-market heterogeneity. Farmers engage in relational contracts receive a higher price but similar rewards for quality. Observable quality attributes are better rewarded in markets with more traders per farmer, while unobservable attributes are rewarded in the presence of other value chain actors (i.e., grain millers and farmer cooperatives). Both regression and machine learning approaches support these findings. • Farmers in developing countries face market-side constraints to enhance output quality. • I use a unique dataset measuring observable and unobservable quality attributes, and link them to prices. • On average, markets only reward quality attributes that are costless to observe. • Quality premium is varying across market characteristics (i.e., number of traders per farmer and presence of other value chain actors).