Is the local wheat market a 'market for lemons'? Certifying the supply of individual wheat farmers in Ethiopia. (8th April 2021)

• Record Type: Journal Article
• Authors: Anissa, Banawe Plambou; Abate, Gashaw; Bernard, Tanguy; Bulte, Erwin
• Is Part Of: European review of agricultural economics. Volume 48:Number 5(2021)
• Page Start: 1162
• Page End: 1186
• Publication Date: 2021-04-08
• Subjects: certification -- quality production in agriculture -- value chain upgrading -- lemons; Agriculture -- Economic aspects -- Periodicals; Agriculture -- Economic aspects -- Europe -- Periodicals; 338.109405
• DOI: 10.1093/erae/jbab018
• Languages: English
• ISSNs: 0165-1587

Abstract

Abstract: Bulking and mixing of smallholder supply dilutes incentives to supply high quality. We introduce wheat 'grading and certification shops' in Ethiopia and use an auction design to gauge willingness-to-pay (WTP) for certification. Bids correlate positively with wheat quality, and ex ante notification of the opportunity of certification improves wheat quality. These findings suggest that local wheat markets resemble a 'market for lemons', crippled by asymmetric information. However, aggregate WTP for grading and certification services does not re-coup the sum of fixed, flow and variable costs associated with running a single certification shop.