The impact of public-private partnerships in food value chains in lower middle-income countries

Abstract

Since the launch of the 2005 Aid for Trade initiative, it has become more popular to disperse development assistance via public-private partnerships (PPPs). Yet, research on the impact of aid dispersed via such PPPs has been limited. This thesis studies the (potential) contribution of PPPs to increased food safety (SDG 2) and increased farmer incomes (SDG 1) in lower middle-income countries. In Chapter 1, the General Introduction, I introduce the topic and main research question, and provide an overview of the methodologies used throughout this thesis. Chapter 2 studies the impact of being surveyed, and finds that this increases the adoption of food safety technology among Kenyan subsistence farmers, thus suggesting that focusing attention to the issue of food safety is an important driver of food safety improvement. Chapter 3 and 4 study how introducing price incentives can help to increase food safety. Chapter 3 finds that providing a modest market premium for safe maize helps Kenyan subsistence farmers to increase the intensity of adoption of food safety technology. In poor years, the resulting safe maize could be consumed at home. In good years, the household would receive a small compensation for the safe maize delivered to the market. Chapter 4 studies how a PPP intervention in the Indonesian dairy value chain increased the quality of milk delivered by members of a large dairy cooperative. Part of the positive impacts on the hygienic and compositional quality of milk are explained by the introduction of an individual price incentive system (that replaced a group-based system). Chapters 5 and 6 study the distribution of rents created by this PPP. Chapter 5 studies how intervention rents are vertically distributed between the dairy processor and the cooperative that represented the smallholder producers, and finds that farmers received higher prices in the short run, but the processor captured the full quality rents after the intervention was completed. Chapter 6 studies the horizontal distribution of benefits between farmers, and finds that the PPP intervention reached mainly large farmer groups and wealthy farmers with relatively many cows. While this may be the most effective way to affect large amounts of milk, the intervention helped these included farmers to earn higher prices, and therefore increased economic inequality within the cooperative membership. Since farmers did not benefit from higher prices on average, this suggests that the poorer subsample may have impoverished relative to the counterfactual without the intervention. Chapter 7, the General Discussion, synthesizes research findings in the light of existing literature, and argues that that the alignment of private interests with development goals is key to realize the intended development outcomes. Especially for the realization of food safety (SDG 2), private interests may be well-aligned with development goals, and PPPs may be an effective organizational tool to spur development. Instead, if the goal is to increase the income of smallholders that deliver their produce to buyers with significant market power, or the goal is to reach the poorest of the poor (SDG 1), private interests and development goals may be misaligned, and intended outcomes are less likely to be reached. While this thesis raises critical questions to the increasingly popular trend to use PPPs to spur development, Chapter 7 further discusses some recommendations for the use of PPPs in food value chains regarding the type of activities funded, the selection of implementing partners, the incentive structure of PPPs and the creation of opportunities for learning. Chapter 7 finally highlights avenues for further research.