Market Outlet Choice and Its Effects on the Welfare of Smallholder Vegetable and Fruit Producers in Ethiopia

Abstract

The decision to choose an appropriate market outlet may involve a self-selection problem. This suggests that unobservable characteristics play an important role, and the examination of the impact of market outlet choice on smallholder household welfare needs to correct this selection bias. Consequently, this study, by using a multinomial endogenous treatment model, examined the determinants of market outlet choices and their subsequent effects on the welfare of smallholder vegetable and fruit producers in Ethiopia. The results on the determinants of market outlet choices obtained using this model indicated that distance to main roads, livestock ownership, access to extension, and cooperative membership influenced the decisions of smallholder farmers in one way or another. Furthermore, the model results obtained by correcting the selectivity indicated that, relative to formal markets, informal markets have a low impact on the welfare of smallholder farmers. Thus, alternative policy measurements aimed at improving the food security and welfare of smallholder farmers should be accompanied by improving their access to formal markets.