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
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.
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.
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
Los Santos (30% of production) One private beneficio and three Cooperatives Turrialba (8% of production) One private beneficio
Private Palmichal de Acosta Cooperative Llano Bonito Cooperative Dota Cooperative Tarrazu
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
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
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
Contribution to public good
contribution to public good Contribution to public good p = 0.000 10 8 6 6,56 5,61 5,61 4 3,01 2 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
contribution to public good Contribution to public good p = 0.000 p = 0.000 10 8 6 6,56 5,61 5,61 4 3,01 2 0 Cooperative farmers partners are cooperative farmers partners are farmers selling to private beneficios Farmers selling to private beneficios
contribution to public good Contribution to public good p = 0.000 p = 0.000 10 8 6 6,56 5,61 5,61 4 3,01 2 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
Contribution to public good: playing with 3 cooperativists Family in Coffee business +1.143 Family at Cooperative +3.309 *** Years in Cooperative -0.109 *** Held an elected post in coop. +2.236 *** Relative implication in Cooperative Appropriate 2.387 *** Lower than others -0.031 Reason to join Cooperative Better prices -0.861 Family tradition 0.353 For financial assistance -2.177 *** Social Aid 2.081 *** Cheating Sold coffee to private beneficio -1.388 * Observations 46 R^2 0.791 Adjusted R^2 0.609 Note: *** 1%, ** 5%, * 10% significance; Regression controlling for age, education, size of production
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'
contribution to public good Contributions by certification p = 0.037 p = 0.131 10 10 9 8 7,66 9 8 7,46 7 6 5,91 7 6 6,22 5 5 4 3 2,72 2,97 4 3 3,08 2,86 2 2 1 1 0 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
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).
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
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
contribution to public good Contributions when control chosen p =0.086 p =0.000 10 9 8 7 6 5 4 3 2 1 0 7,26 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
contribution to public good Behavior by cooperativists dependent on real world 'cheating' p =0.033 p =0.000 10 9 8 7 6 6,26 7,74 7,16 5 4 3 3,6 2 1 0 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
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'
Thank you
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)
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 769 2600 600 Size of the canton (ha) 2617,58 6626,72 5886,42 Number of Poligonos 366 784 735 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
Summary Statistics Cooperatives Private 'beneficios' All Coops All Private C. Dota C. Tarrazu C. Llano Bonito Private 1 Private 2 Age 44.01 53.5 40 40.47 52.67 55.38 50.72 Sex 0.09 0.13 0 0.15 0.096 0.15 0.05 (0 man, 1 woman) Born in the region (percentages) Yes 87.2 80 95 85 96.77 92.31 100 No 1.8 6.6 0 0 0 0 0 No but have been there many years 10.9 13.3 5 15 3.23 7.68 0 Education (oercentages) Primary 63.6 60 55 75 77.42 69.23 83.33 Secondary 12.7 20 15 5 6.45 7.69 5.56 Technical/Professional Studies 18.1 20 25 10 6.45 0 11.11 University 5.45 0 5 10 9.68 23.08 0 Unique family member on the coffee business 0.72 0.6 0.75 0.8 0.51 0.61 0.44 (0 yes, 1 no) Coffe as unique source of income 0.32 0.4 0.35 0.25 0.74 0.76 0.72 (0 yes, 1 no) If not, share of income that coffee represents Less than half family income 11.7 11.1 22.2 6.25 19.35 38.46 5.56 Half of family income 35.2 11.1 44.4 43.75 32.23 23.08 38.89 More than half family income 52.94 77.7 33.3 50 48.39 38.46 55.56 Production 2010-2011 (in cajuelas) Maduro 2249.9 2380 3719.2 683 1172 836.36 1414.44 (std. Deviation) 2249.9 1746 4231.3 569.95 2249.66 567.99 1398.7 Verde 55.96 37.35 117.2 11.68 23.46 (std. Deviation) 133.1 46.35 208.5 23.37 32.72 Observations 55 15 20 20 31 13 18