How does a shorter supply chain affect pricing of fresh food? Evidence from a natural experiment
This article (PDF) which was published in the Food Policy journal elaborated on the impacts of shorter supply chains on the prices of fresh food in Turkey. The market for fresh food is often characterized by a large number of intermediaries delivering the product from the farmer to the retailer. The existence of these intermediaries is often claimed to introduce market frictions that push fresh food prices up. Using data from a policy reform in Turkey in the market for fresh fruit and vegetables, the authors tested the hypothesis that scaling down these frictions reduces the level of prices. A new Turkish law from January 2012 aims to remove informal intermediaries; reduce the farmers’ cost of access to formal intermediaries; and to provide the farmers with the option to directly sell their products to retailers. The authors found that the reform has strikingly reduced the prices in the wholesale market. They also provide some rough evidence that there is no price effect in the retail market, which suggests that part of the wholesale markups may have been transferred to the retailers. The results suggest that consumers have not received any direct benefits from the reform—ignoring the general equilibrium effects.