Public good contributions among coffee farmers in Costa Rica: - - PowerPoint PPT Presentation

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.

• 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.

Questions

Coffee in Costa Rica: ICAFE Regulation

Producers:

• Must bring their coffee cherries to a beneficio within 24 hours
• f 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

Cooperative Dota Private Palmichal de Acosta Cooperative Llano Bonito 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’

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

Order of tasks

Contribution to public good

Contribution to public good

Farmers selling to private beneficios partners of own type partners of other type 6,56 5,61 3,01 5,61 2 4 6 8 10 Cooperative farmers

contribution to public good

partners are cooperative farmers partners are farmers selling to private beneficios p = 0.000

Contribution to public good

6,56 5,61 3,01 5,61 2 4 6 8 10 Cooperative farmers Farmers selling to private beneficios

contribution to public good

partners are cooperative farmers partners are farmers selling to private beneficios p = 0.000 p = 0.000

Contribution to public good

6,56 5,61 3,01 5,61 2 4 6 8 10 Cooperative farmers Farmers selling to private beneficios

contribution to public good

partners are cooperative farmers partners are farmers selling to private beneficios partners of own type partners of other type p = 0.000 p = 0.000

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'

Contributions by certification

7,66 5,91 2,72 2,97 1 2 3 4 5 6 7 8 9 10 Rainforest Certified (N=18) Not Rainforest Certified (N=36) 6,22 7,46 3,08 2,86 1 2 3 4 5 6 7 8 9 10 Fair Trade Certified (N=40) Not Fair Trade Certified (N=15)

contribution to public good

p = 0.037 p = 0.131

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

Decision to chose control

proportion choosing control

0,83 0,83 0,72 0,93

0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1

Cooperative farmers partners are cooperative farmers partners are farmers selling to private beneficios partners of own type partners of other type Farmers selling to private beneficios

Contributions when control chosen

contribution to public good

7,26 5,57 6,27 5,82

1 2 3 4 5 6 7 8 9 10

p =0.000 p =0.086

Cooperative farmers Farmers selling to private beneficios

6,56 5,61 3,01 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

Behavior by cooperativists dependent on real world 'cheating'

p =0.000 p =0.033

contribution to public good

6,26 7,74 3,6 7,16

1 2 3 4 5 6 7 8 9 10

selling to private market (N=17) not selling to private market (N=38) 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

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

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)

Private beneficios

• Coope Dota (Santa Maria de Dota)
• Coope Tarrazu (San Marcos de Tarrazu)
• Coope Llano Bonito (Leon Cortes)

Regarding sociodemographic characteristics (age, education involvement in coffee business) no differences across cooperatives

Cooperatives

• 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

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 0.15 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

No but have been there many years

10.9 13.3 5 15 3.23 7.68

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 11.11

University

5.45 5 10 9.68 23.08

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