Quality control and value creation: an experimental study

Poor countries participate in global value chains typically as suppliers of primary commodities that serve as inputs into production in richer countries, who add value by processing them further. Within poor countries, this pattern repeats.

Farmers, who constitute the majority of the poor and the labor force, produce low quality and unprocessed products, and any quality refinement and processing to intermediate goods, when it occurs, takes place in plants run by large, often transnational, companies.

Reshoring the processing of agricultural products from rich countries to the location of origin is key for agriculture to become an engine of growth for poor countries.

But reshoring is complicated due to a fundamental trade-off between quality control and value creation: as a product becomes more processed, it typically becomes more difficult for a buyer to verify its quality. In this project, we will experimentally test this trade-off in the coffee sector in Uganda.

We will exploit recent advancements in infrared spectral scanning to verify the quality of a processed product in the field, and conduct an RCT that tests whether it is possible for farmers to undertake a larger share of value creation when the quality of processed products is verifiable.

We believe this study has the potential to transform farmers’ fortunes precisely because it allow farmers in poor countries to gain from – rather than merely participate in – the international trade of agricultural commodities.