Globalization, Privatization, and Vertical Coordination in Food Value Chains in Developing and Transition Countries

Food and agricultural commodity value chains in developing and transition countries have undergone tremendous changes in the past decades. Companies and property rights have been privatized, markets liberalized, and economies integrated into global food systems. The liberalization and privatization initially caused the collapse of statecontrolled vertical integration. More recently, private vertical coordination systems have emerged and are growing rapidly as a response to consumer demand for food quality and safety on the one hand and the farms’ production constraints caused by factor market imperfections. In this paper we (a) demonstrate the importance of these changes, (b) discuss the implications for efficiency and equity and (c) provide empirical evidence on the effects in several developing and transition countries. Paper prepared for the Plenary Session on “Trade and Marketing of Agricultural Commodities in a Globalizing World” at the 26 Conference of the International Association of Agricultural Economists, Queensland, Australia, August 12-18, 2006