Josepa (Pepita) Miquel-Florensa (Toulouse School of Economics) on "Supply Assurance, Relational Contracts and Vertical Integration: Evidence from Costa Rica’s Coffee Chain"

Speaker:  Josepa (Pepita) Miquel-Florensa - Toulouse School of Economics
  Wednesday, December 2, 2015 at 2:30 PM Aula Seminari, Vicolo Campofiore 2
This paper studies vertical integration between coffee mills and exporters in Costa Rica - a context in which demand and supply assurance considerations are important. Vertical integration is compared against both forward contracts and relational contracts. Detailed data on transactions between and within firms reveals that trade within integrated chains is insulated from market forces and vertical integration achieves better supply assurance. Due to the possibility of strategic default, both formal and relational contracts are only imperfect substitutes for integration. Integration’s benefits from supply assurance, however, imply worse market access and relationships with independent suppliers. The evidence strongly supports models in which firms boundaries alter temptations to renege on relational contracts. Policy implications for export-oriented agricultural chains in developing countries are discussed.

Programme Director
Angelo Zago

Publication date
June 18, 2015