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Choice of Modern Food Distribution Channels and Its Welfare Effects: Empirical Evidence from Taiwan

Author

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  • Yun-Cih Chang

    (Department of Agricultural Economics, National Taiwan University, Taipei 10617, Taiwan)

  • Min-Fang Wei

    (Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, Champaign, IL 61820, USA)

  • Yir-Hueih Luh

    (Department of Agricultural Economics, National Taiwan University, Taipei 10617, Taiwan)

Abstract

The determinants and/or economic effects of modern food distribution channels have attracted much attention in previous research. Studies on the welfare consequences of modern channel options, however, have been sparse. Based on a broader definition of modern food distribution channels including midstream processors and downstream retailers (supermarkets, hypermarkets, brand-named retailers), this study contributes to the existing body of knowledge by exploring the distributional implications of farm households’ choice of modern food distribution channels using a large and unique farm household dataset in Taiwan. Making use of the two-step control function approach, we identify the effect of modern food distribution options on farm households’ profitability. The results reveal selling farm produce to modern food distributors does not produce a positive differential compared to the traditional outlets. Another dimension of farm household welfare affected by the choice of modern food distribution channel is income inequality. We apply the Lerman and Yitzhaki decomposition approach to gain a better understanding of the effect of the marketing channel option on the overall distribution of farm household income. The Gini decomposition of different income sources indicates that the choice of modern food distribution channels results in an inequality-equalizing effect among the farm households in Taiwan, suggesting the inclusion of smallholder farmers in the modern food distribution channels improves the overall welfare of the rural society.

Suggested Citation

  • Yun-Cih Chang & Min-Fang Wei & Yir-Hueih Luh, 2021. "Choice of Modern Food Distribution Channels and Its Welfare Effects: Empirical Evidence from Taiwan," Agriculture, MDPI, vol. 11(6), pages 1-13, May.
    • Handle: RePEc:gam:jagris:v:11:y:2021:i:6:p:499-:d:564025
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    Cited by:

    1. Giuseppe Timpanaro, 2023. "Agricultural Food Marketing, Economics and Policies," Agriculture, MDPI, vol. 13(4), pages 1-9, March.
    2. Ming-Feng Hsieh & Yir-Hueih Luh, 2022. "Is Contract Farming with Modern Distributors Partnership for Higher Returns? Analysis of Rice Farm Households in Taiwan," Sustainability, MDPI, vol. 14(22), pages 1-16, November.
    3. Vladimir Ristanović & Aleksandra Tošović-Stevanović & Silvia Maican & Andreea Muntean, 2022. "Economic overview of the distribution channels used by Eastern European small farms for their agricultural products," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 68(8), pages 299-306.

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