@article{Escobal:176213,
      recid = {176213},
      author = {Escobal, Javier and Agreda, Victor and Reardon, Thomas},
      title = {Endogenous institutional innovation and  agroindustrialization on the Peruvian coast},
      journal = {Agricultural Economics: The Journal of the International  Association of Agricultural Economists},
      address = {2000-09},
      number = {968-2016-75899},
      pages = {12},
      year = {2000},
      abstract = {This paper presents an analysis of endogenous  institutional innovations that have recently emerged in the  agroindustrial
zone of Chincha, on the coast of Peru. These  innovations include: (1) contracts between agroindustrial  firms and large farmers,
introduced by the firms themselves  to assure timely delivery and compliance with strict  requirements implied by the emerging
demanding quality and  safety standards for agro-export of processed asparagus;  (2) management services exchanged for labor
supervision and  land collateral in share tenancy contracts between a  management company and "farmer companies" of small
cotton  farmers. These contracts introduced by the management  company illustrate those described theoretically by  Eswaran
and Kotwal [Am. Econ. Rev. 75 (3), 352-367]. The  nature and importance of these institutional changes are  twofold: (1)
They were induced institutional innovations  driven by the requirements of agroindustrialization itself.  (2) Together they had
ambiguous employment and income  impacts (tending to the negative). On the one hand, the  emergence of asparagus and
firm-farm contracts reduced  employment through exclusion of small farms and shifts to  capital-intensive crops. On the other
hand, the  reinforcement of smallholder cotton and the emergence of  farmer companies increased employment and income  of
smallholders. The institutional innovation allowed them  to reduce risk and increase profits and thus access some of  the benefits
of agroindustrialization and globalization.  While processing firm-farm contracts are common in Peru, as  is the presence of
NGOs bringing subsidized credit, the  private management firm innovation is rare and new in Peru  and apparently also in the
region, and of great interest.  In fact, policymakers and NGOs have recently discovered  that this innovation is taking place
and are asking hard  questions about whether this innovation can and will be  diffused. The interest in the private  for-profit
institutional change is sharpened by growing  doubts about how economically sustainable and widespread a  response NGO help
can be to small farmers in maintaining  their participation in income-enhancing  agroindustrialization. Moreover, with changes
in land laws  and markets the fluidity of the situation is apparent, with  agroindustrial firms even starting to ask  themselves
whether contracts with large farms are necessary  and best.© 2000 Published by Elsevier Science B.V.},
      url = {http://ageconsearch.umn.edu/record/176213},
      doi = {https://doi.org/10.22004/ag.econ.176213},
}