DP16487 Big Fish in Thin Markets: Competing with the Middlemen to Increase Market Access in the Amazon

Author(s): Viva Bartkus, Wyatt J Brooks, Joseph Kaboski, Carolyn Pelnik
Publication Date: August 2021
Keyword(s): Collective Investment, monopsony, poverty trap, Rural development
JEL(s): O1, O13, O16, O18
Programme Areas: Development Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16487

Middlemen are ubiquitous in supply chains. In developing countries they help bring products from remote communities to end markets but may exert strong market power. We study a cooperative intervention which organizes together poor fishing communities in the Amazon --- one of the poorest and most remote regions of the world --- to purchase large boats in order to partially bypass middlemen and deliver their fish directly to market. We find that the intervention increases income by 27%, largely through an increase in price received, and also increases consumption. Moreover, the intervention is highly cost effective with the projected stream of income gains easily covering the cost of the investment. Finally, we formalize a model in which the market power of middlemen itself can create a poverty trap, which can be eliminated with cooperative investment.