Assessment of Marketing Channel Choice and its Impacts: The Case of Paddy Smallholders in India

Abstract

Market access for smallholders is a key policy issue in developing economies. However, smallholders often face barriers in accessing remunerative marketing channels. Combining the theoretical framework drawn from resource-based view, social exchange, and transaction cost theory, we jointly estimate the determinants of marketing channel choice and the impact of channel choice in a joint framework. Results show that households’ resource endowments and social capital influence channel selection decision. Paddy sales through government agencies help farmers realize higher prices because of the higher government support prices and proximity to farms, whereas sales through licensed traders operating in the regulated markets (APMC) results in reduced paddy prices due to high transportation costs. Furthermore, smallholders preferring government agencies, processors, and licensed traders over village traders realize greater farm income. Reasons for such findings can be deduced to be the result of low marketable surplus for smallholders selling to village traders.