Regulations, Brokers and Interlinkages: The Institutional Organization of Wholesale Markets in India

37 Pages Posted: 14 Jan 2012

See all articles by Bart Minten

Bart Minten

International Food Policy Research Institute (IFPRI) - CGIAR Consortium

Anneleen Vandeplas

LICOS - Centre for Institutions and Economic Performance

Johan F. M. Swinnen

KU Leuven - Centre for Institutions and Economic Performance (LICOS); European Commission, DG II

Date Written: June 1, 2011

Abstract

There is a vigorous debate on the liberalization of heavily regulated agricultural markets in India. A crucial institutional characteristic is the role of state regulated brokers in wholesale markets. Relying on data from a unique survey in Uttarakhand, a state in North-India, we find that regulations on margins are ineffective as most brokers charge rates that significantly exceed the regulated ones. We also find that a majority of farmers self-select into long-term relationships with brokers. These relationships allow some of the farmers to interlink credit and insurance markets to the agricultural output market. This interlinkage does however not appear to be an instrument for farmer exploitation (as it does not lead to worse inputs, high interest rates, or lower implicit output prices), but is seemingly an extra service by brokers as to establish farmer loyalty to him and thus to ensure future supplies.

Keywords: India, agricultural marketing, brokers, interlinkages

JEL Classification: Q12, Q13, L15

Suggested Citation

Minten, Bart and Vandeplas, Anneleen and Swinnen, Johan F.M., Regulations, Brokers and Interlinkages: The Institutional Organization of Wholesale Markets in India (June 1, 2011). Available at SSRN: https://ssrn.com/abstract=1984578 or http://dx.doi.org/10.2139/ssrn.1984578

Bart Minten (Contact Author)

International Food Policy Research Institute (IFPRI) - CGIAR Consortium ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

Anneleen Vandeplas

LICOS - Centre for Institutions and Economic Performance ( email )

Waaistraat 6 - bus 3511
Leuven, B-3000
Belgium

HOME PAGE: http://www.econ.kuleuven.be/licos

Johan F.M. Swinnen

KU Leuven - Centre for Institutions and Economic Performance (LICOS) ( email )

Waaistraat 6
Leuven, B-3000
Belgium

European Commission, DG II ( email )

Wetstrath 200
Office 15172
1049 Brussels
Belgium
+32-2-2960442 (Phone)
Not available (Fax)

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