Public good contributions among coffee farmers in Costa Rica: co-operativists and private dealers

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Conrad Walters
6 years ago
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1 Public good contributions among coffee farmers in Costa Rica: co-operativists and private dealers Astrid Hopfensitz & Josepa Miquel-Florensa (Toulouse School of Economics) Workshop on The Cognitive Foundations of Group Attitudes and Social Interaction

2 Cooperatives in the coffee market Two different organizations in the coffee market: Cooperatives: farmers manage the institution democratically, a share of profits returns to the community, Private: multinationals or local private companies Strong social ties in each group: long-term relationships. Cooperatives offer financial, technical and social support, but private beneficios can offer higher prices. Cooperative farmers have incentives to shirk to get the better prices.

3 Questions 1. We study contributions to a public good game in 3 situations: with 'unknown' cooperativists with 'unknown' private market members with people present in the room (that are of same 'type') 2. Choice of a control mechanism in the public good game And how do these choices relate to: Group membership Certifications of the cooperative (Fair Trade), Certifications of the farmer (Rainforest) Real world behavior with respect to the Cooperative rules: Cooperative farmers selling coffee to private beneficios.

4 Coffee in Costa Rica: ICAFE Regulation Producers: Must bring their coffee cherries to a beneficio within 24 hours of harvesting Are given an anticipo when depositing; final prices are regulated (as function of NY price) Beneficios: Receive coffee and are responsible for the processing of the beans into cafe oro and for the financing and selling of the coffee. Can be either privately managed or Procuder s Cooperatives Contracts and profits subject to ICAFE regulations Exporters and roasters

5 Los Santos (30% of production) One private beneficio and three Cooperatives Turrialba (8% of production) One private beneficio

6 Private Palmichal de Acosta Cooperative Llano Bonito Cooperative Dota Cooperative Tarrazu

7 Experimental design Anonymous pen-and-paper experiment. Location: cooperative meeting room or habilitated space at private beneficios Average payment: half-day salary of an agricultural worker. Additional information: self report questionnaire on production and quality information from beneficio on farmer s production in last three harvest seasons

8 Public good game One shot, public good game Initial endowment 10 points keep in private envelope transfer to public envelope (multiplied by 1.5) 4 players interact, three others are: participants in room from a cooperative from a private beneficio

9 Order of tasks public good game: i with players in room ii with members of a cooperative iii with players that bring their coffee to a private beneficio controller decision: iv for each of the games previously played, decide whether to introduce a controller or not v Repeat (i) to (iii) with or without controller as choosen in 4 No information revealed on contributions until the end of all stages

16 Contribution to public good

17 contribution to public good Contribution to public good p = ,56 5,61 5,61 4 3, Cooperative farmers partners are cooperative farmers partners are farmers selling to private beneficios Farmers selling to private beneficios partners of own type partners of other type

18 contribution to public good Contribution to public good p = p = ,56 5,61 5,61 4 3, Cooperative farmers partners are cooperative farmers partners are farmers selling to private beneficios Farmers selling to private beneficios

19 contribution to public good Contribution to public good p = p = ,56 5,61 5,61 4 3, Cooperative farmers partners are cooperative farmers partners are farmers selling to private beneficios Farmers selling to private beneficios partners of own type partners of other type

20 Contribution to public good: playing with 3 cooperativists Family in Coffee business Family at Cooperative *** Years in Cooperative *** Held an elected post in coop *** Relative implication in Cooperative Appropriate *** Lower than others Reason to join Cooperative Better prices Family tradition For financial assistance *** Social Aid *** Cheating Sold coffee to private beneficio * Observations 46 R^ Adjusted R^ Note: *** 1%, ** 5%, * 10% significance; Regression controlling for age, education, size of production

cheating not possible Fair trade: on cooperative level

21 Contributions by certification Rainforest alliance: individual objective evaluation and enforcement => cheating not possible Fair trade: on cooperative level hard to evaluate and little enforcement => cheating 'common'

22 contribution to public good Contributions by certification p = p = , , , , ,72 2, ,08 2, Rainforest Certified (N=18) Not Rainforest Certified (N=36) 0 Fair Trade Certified (N=40) Not Fair Trade Certified (N=15) partners are cooperative farmers partners are farmers selling to private beneficios

23 Results ii: Choice and reaction to control Experience with control: Private beneficios: follow ICAFE rules strictly, objectively verifiable (ex. limits on 2% green enforced) Cooperatives: exceptions to rules (ex. green percentages), democratic decisions on surplus division, external rules (Certifications).

24 Control Decision by participants whether they want to have control or not Control by independent entity, has a cost of 1 point. Leading to fines of players: Contributing less than the average of their group Fine size relative to distance to average

25 proportion choosing control Decision to chose control 1 0,9 0,8 0,7 0,83 0,83 0,72 0,93 0,6 0,5 0,4 0,3 0,2 0,1 0 Cooperative farmers partners are cooperative farmers partners are farmers selling to private beneficios Farmers selling to private beneficios partners of own type partners of other type

26 contribution to public good Contributions when control chosen p =0.086 p = ,26 6,56 Cooperative farmers 6,27 5,57 5,82 3,01 5,61 Farmers selling to private beneficios 5,61 partners are cooperative farmers partners are farmers selling to private beneficios part 2: when control is in place part 1: when no control in place

27 contribution to public good Behavior by cooperativists dependent on real world 'cheating' p =0.033 p = ,26 7,74 7, , selling to private market (N=17) partners are cooperative farmers partners are farmers selling to private beneficios not selling to private market (N=38) part 2: when control is in place part 1: when no control in place

28 Conclusions Contribution to public good related to real world choices (possibility to verify cheating through cooperative information) Cooperativist contribute more when playing with their own type than with private market. Private market participants do not react to type of partner. Control leads to higher contributions by cooperativists especially for those that are 'honest'

29 Thank you

30 Private beneficios Beneficio 1: Palmichal de Acosta Multinational company, selling to national and international markets (1600 growers, 25 receiving stations in the area) Beneficio 2: Santa Rosa (Turrialba) Family beneficio, selling to the national market and to the international market ( foam coffee due to soil conditions)

31 Cooperatives Coope Dota (Santa Maria de Dota) Coope Tarrazu (San Marcos de Tarrazu) Coope Llano Bonito (Leon Cortes) C. Dota C. Tarrazu C. Llano Bonito Number of associates Size of the canton (ha) 2617, , ,42 Number of Poligonos Accreditations: Fair Trade x x Rainforest Alliance x (15% of prod.) x (30% of prod) Starbucks CAFÉ Practices x x Regarding sociodemographic characteristics (age, education involvement in coffee business) no differences across cooperatives

32 Summary Statistics Cooperatives Private 'beneficios' All Coops All Private C. Dota C. Tarrazu C. Llano Bonito Private 1 Private 2 Age Sex (0 man, 1 woman) Born in the region (percentages) Yes No No but have been there many years Education (oercentages) Primary Secondary Technical/Professional Studies University Unique family member on the coffee business (0 yes, 1 no) Coffe as unique source of income (0 yes, 1 no) If not, share of income that coffee represents Less than half family income Half of family income More than half family income Production (in cajuelas) Maduro (std. Deviation) Verde (std. Deviation) Observations

Costa Rica: In Depth Coffee Report: COFFEE INDUSTRY STRUCTURE

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