Working Paper: CEPR ID: DP16487
Authors: Joseph Kaboski; Wyatt J. Brooks; Viva Bartkus; Carolyn Pelnik
Abstract: Middlemen are ubiquitous in supply chains. In developing countries they help bring products from remote communities to end markets but may exert strong market power. We study a cooperative intervention which organizes together poor fishing communities in the Amazon --- one of the poorest and most remote regions of the world --- to purchase large boats in order to partially bypass middlemen and deliver their fish directly to market. We find that the intervention increases income by 27%, largely through an increase in price received, and also increases consumption. Moreover, the intervention is highly cost effective with the projected stream of income gains easily covering the cost of the investment. Finally, we formalize a model in which the market power of middlemen itself can create a poverty trap, which can be eliminated with cooperative investment.
Keywords: poverty trap; monopsony; collective investment; rural development
JEL Codes: O1; O13; O16; O18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| price received for pirarucu fish (Q22) | household income (D19) |
| cooperative intervention (C71) | market power of middlemen (D40) |
| market power of middlemen (D40) | poverty trap (I32) |
| cooperative intervention (C71) | escape from poverty trap (I32) |
| cooperative intervention (C71) | household income (D19) |
| cooperative intervention (C71) | price received for pirarucu fish (Q22) |
| cooperative intervention (C71) | monthly consumption (D12) |