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.

Questions 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.

Coffee in Costa Rica: ICAFE Regulation Producers : • Must bring their coffee cherries to a beneficio within 24 hours of 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

Turrialba (8% of production) One private beneficio Los Santos (30% of production) One private beneficio and three Cooperatives

Cooperative Private Llano Bonito Palmichal de Acosta Cooperative Dota 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’

Order of tasks 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

Contribution to public good

Contribution to public good p = 0.000 contribution to public good 10 8 6,56 5,61 5,61 6 4 3,01 2 0 Cooperative farmers Farmers selling to private beneficios partners are cooperative farmers partners of own type partners are farmers selling to private partners of other type beneficios

Contribution to public good p = 0.000 p = 0.000 contribution to public good 10 8 6,56 5,61 5,61 6 4 3,01 2 0 Cooperative farmers Farmers selling to private beneficios partners are cooperative farmers partners are farmers selling to private beneficios

Contribution to public good p = 0.000 p = 0.000 contribution to public good 10 8 6,56 5,61 5,61 6 4 3,01 2 0 Cooperative farmers Farmers selling to private beneficios partners are cooperative farmers partners of own type partners are farmers selling to private partners of other type beneficios

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 p = 0.037 p = 0.131 10 10 9 9 contribution to public good 7,46 7,66 8 8 7 7 6,22 5,91 6 6 5 5 4 4 3,08 2,97 2,86 2,72 3 3 2 2 1 1 0 0 Rainforest Certified Not Rainforest Certified Fair Trade Certified Not Fair Trade Certified (N=18) (N=36) (N=40) (N=15) 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 1 0,93 proportion choosing control 0,9 0,83 0,83 0,8 0,72 0,7 0,6 0,5 0,4 0,3 0,2 0,1 0 Cooperative farmers Farmers selling to private beneficios partners are cooperative farmers partners of own type partners are farmers selling to private partners of other type beneficios

Contributions when control chosen p =0.086 p =0.000 10 contribution to public good 9 8 7,26 7 6,56 6,27 5,82 5,57 6 5,61 5,61 5 4 3,01 3 2 1 0 Cooperative farmers Farmers selling to private beneficios partners are cooperative farmers part 2: when control is in place partners are farmers selling to private part 1: when no control in place beneficios

Behavior by cooperativists dependent on real world 'cheating' p =0.033 p =0.000 10 contribution to public good 9 7,74 8 7,16 7 6,26 6 5 4 3,6 3 2 1 0 selling to private market (N=17) not selling to private market (N=38) partners are cooperative farmers part 2: when control is in place partners are farmers selling to private part 1: when no control in place beneficios

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

Private beneficios 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)

Cooperatives • Coope Dota (Santa Maria de Dota) • Coope Tarrazu (San Marcos de Tarrazu) • Coope Llano Bonito (Leon Cortes) 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 Regarding sociodemographic characteristics (age, education involvement in coffee business) no differences across cooperatives