Crop commercialization is one of the leading forces behind today's agricultural development. Trade enables farmers to diversify their production through a market-linked approach, bringing significant advantages to small-scale producers, like access to new customers, lower costs, and business risk diversification. Nevertheless, the outcome could be very different in a risky environment, like developing countries. This scenario can be exacerbated (or eased) under the current second unbundling revolution allowing the participation of Global Value Chains (GVCs) also for agriculture products and smallholder farmers. The conceptual framework for GVCs participation and positioning stands on what was outlined by Antràs and Chor in 2013 and 2018. The literature has vastly debated how a value chain is structured, but it has not yet discussed how it gets structured, especially at the farmer level. Given the vacuum in the literature in the ex-ante scenario, this research project aims at studying how smallholder farmers in developing countries position into the market chain first and in GVCs second. The proposed model stands on an input-output table set at the micro-level and a revised Antràs and Chor's measure of upstreamness in the value chain leveraging for farming household's selling location and crop buyer.
Classic economic theory looked at economic development as the reallocation of resources from a less productive agrarian society to a more efficient industrial one (Lewis, 1954). In the 1960s, a new way of thinking of agricultural development emerged thanks to the Green Revolution in Asia. This new literature viewed agriculture as a critical driver of growth and not a marginal step of economic development (Johnston & Mellor, 1961; Timmer, 1988). The two decades preceding the release of the 2008 World Development Report on agricultural development witnessed a steep decline in the availability of public resources for agriculture and rural development (Anriquez & Stamoulis, 2007). Nowadays, evidence-based results suggest that government regulations play a central role in agricultural development as much as the improvement of agricultural technologies, physical infrastructure, and education do (Divanbeigi & Saliola, 2017).
Crop commercialization is among the main drivers of today's economic development. Agricultural trade increases incomes and improves nutrition; yet, such an effect depends on a series of factors like positioning in the market chain. Academic research has been long debated on market/GVCs participation, but it has not yet reached a joint assessment for positioning, especially at the level of small farmers.
Although the study of farmers' market decisions dates back to the 1990s (Fafchamps, 1992; von Braun, 1995; Key et al., 2000), a systematic approach on how the market gets structured at the farmer level is still missing. A robust theoretical approach to smallholder farmers' positioning in GVCs would represent the keystone of modern rural development literature. In this work, the research activity adjusts Antràs and Chor's upstreamness indicator to farming household's selling location and buyer market chain. To this end, this project revises the classic world input-output table considering households instead of countries and crop buyers instead of sectors.
The novelty of this work stands on three main facts:
1. it adapts Antràs and Chor's GVCs positioning indicator to smallholder farmers' market chain;
2. it provides a replicable setting on how micro-level value chains get structured leveraging farming household's selling location and crop buyer;
3. it assesses how the estimated degree of positioning in the market chain affects farmers' participation in GVCs.
Although the work sets its bases on data gatherings pre-COVID-19-pandemic, its analysis will allow readers and policymakers to comment on future GVCs aspects, even post-pandemic. Knowledge of farmers' positioning is essential for creating policy instruments to support agricultural development and global food security. Effectively reaching and training smallholder farmers for the global economy is a significant challenge for policymakers targeting poverty alleviation, food production, and security.
Finally, this empirical analysis tiles the way to additional future research. Given the relevance of GVCs structuring at the micro-level, new and better data will come on the final use expenditure and the value-added generated. It would be worth distinguishing these values among lines of crop selling and buyers. In this respect, one might be confident that international initiatives like LSMS-ISA and Enterprise Surveys will present additional features related to farmers' market practices in the future.
REFERENCES
Anriquez, G., & Stamoulis, K. (2007). Rural Development and Poverty Reduction: Is Agriculture Still the Key? (Vol. 4).
Divanbeigi, R., & Saliola, F. (2017). Regulatory Constraints to Agricultural Productivity. The World Bank.
Fafchamps, M. (1992). Cash Crop Production, Food Price Volatility, and Rural Market Integration in the Third World. American Journal of Agricultural Economics, 74(1).
Johnston, B. G., & Mellor, J. W. (1961). The Role of Agriculture in Economic Development. American Economic Review, 87(2).
Key, N., Sadoulet, E., & Janvry, A. D. (2000). Transactions Costs and Agricultural Household Supply Response. American Journal of Agricultural Economics, 82(2).
Lewis, W. A. (1954). Economic Development with Unlimited Supplies of Labour. The Manchester School, 22(2).
Timmer, C. (1988). The agricultural transformation. In H. Chenery & T. N. Srinivasan (A c. Di), Handbook of Development Economics (Vol. 1, pagg. 275¿331). Elsevier.
Von Braun, J. (1995). Agricultural commercialization: Impacts on income and nutrition and policy implications. Food Policy, 20(3).