Global Agrifood Value Chains and Local Poverty Reduction: What Happens to Those Who Don’t Plug In?

Abstract

The spread of supermarket retailing has transformed food production in developing countries including Indonesia. However, little attention has been paid to how the introduction of a supermarket retailer affects those farmers who continue to sell to traditional market channels. Our research suggests that in regions where there are both modern and traditional buyers, competition effects can negatively affect farmers who continue to sell to traditional markets. This result underlines the fact that while sectorial transformation has desirable poverty reduction potential, actual impacts are lumpy. The distribution of farmer participation in a region may result in a case where the upgrading of agrifood supply chains can increase poverty in the absence of policy interventions.