Effects of Market Proximity on the Profitability of Farmer Collectives – Evidence from India
Fall 2024 Harry ’51 and Joshua ’49 Tsujimoto Perspectives in Global Development Seminar Series
Abstract
There is a growing interest in fostering farmer-producer organizations (FPOs) to tackle the challenges of smallholder farmers in low and middle-income countries. FPOs offer opportunities for achieving economies of scale and enhanced bargaining power for the farmers in the agricultural markets, thereby overcoming the commonly understood challenges of ensuring remunerative returns from agriculture for individual farmers. In this paper, we show that while this collectivization offers promise, the sustainability of FPOs as business entities, similar to that of individual farmers, is also influenced by their proximity to agricultural markets and other value chain services. We construct a unique dataset that includes all farmer-producer organizations (FPOs) in India with available financial data and disaggregated geospatial information on their locations and market proximities. Using an instrumental variable (IV) approach, we show that each additional kilometer from a town with a population of 5,000 to 10,000 results in an annual decrease of approximately Rs 890 per FPO shareholder (equivalent to roughly 10 USD per shareholder). These results underscore the economic implications of geographical distance and market access on the financial well-being of FPOs and emphasize the significance of organizational design and policy support in mitigating transaction costs and geographical disadvantages for FPOs.
About the speaker
Mathew Abraham is the Assistant Director of the Tata-Cornell Institute (TCI) for Agriculture and Nutrition, an institution that focuses on addressing issues of poverty, malnutrition, and sustainable agricultural development in India and other developing countries. At TCI, Mathew coordinates research activities, offers strategic guidance and support for project implementation.
Mathew has a background in agricultural economics and international development. His work often involves collaborating with a wide range of stakeholders, including academic researchers, government agencies, NGOs, and local communities, to implement evidence-based solutions that drive economic growth and improve nutritional outcomes.
Before taking on his current role, Mathew joined TCI as a post-doctoral associate in August 2015, after completing his Ph.D. from the Department of International Economics and Management, Copenhagen Business School, Denmark. Before joining TCI, he worked at the Centre Public Policy at the Indian Institute of Management Bangalore. His research focuses on evaluation methodologies, agricultural value chains and markets, farmer producer organizations, food security in developing countries, technology, and institutional innovation for agricultural development.
Seminar co-sponsor
Tata-Cornell Institute (TCI) for Agriculture and Nutrition
About the seminar series
The Harry ’51 & Joshua ’49 Tsujimoto Perspectives in Global Development Seminar Series showcases innovative approaches to development with experts from around the globe. Each year, the series attracts online registrants from over 45 countries and more than 350 organizations.
Seminars are held Wednesdays from 12:20-1:10 p.m. eastern time during the semester in 175 Warren Hall. Students, faculty and the general public are welcome to attend in-person or via Zoom.
The series is co-sponsored by the Department of Global Development, the Department of Natural Resources and the Environment, the Charles H. Dyson School of Applied Economics and Management, and the School of Integrative Plant Science as part of courses GDEV 4961, AEM 4961, NTRES 4961, GDEV 6960, AEM 6960, and NTRES 6960.
