Using detailed survey data on broiler growers, we tested for the existence of hold-up problems in the broiler industry in Jiangsu Province, China. We found that growers’ investments in chicken houses, which are assets with a high degree of physical and location specificity, increased along with the number of potential buyers (integrators) nearby. Such an effect was particularly strong in proximity to leading industry buyers. These results support the existence of hold-ups in the Chinese broiler industry. However, we failed to find evidence that a longer-term contract led to higher grower investments in chicken houses, possibly because of the lack of a minimum purchase guarantee in a typical contract. A key policy implication of this study is that subsidies to growers, from the government or buyers, can alleviate the underinvestment problem caused by hold-ups.
|Number of pages||16|
|Journal||Canadian Journal of Agricultural Economics|
|State||Published - Dec 2021|
Bibliographical noteFunding Information:
This research was financially supported by National Natural Science Foundation of China (grant number 71573130 and 71973066). We are grateful to Nanjing Agricultural University, Program Development of Jiangsu Higher Education Institutions (PAPD), and China Center for Food Security Studies, Nanjing, China. This work was conducted when Shufen Tang was visiting the University of Kentucky as a visiting scholar.
© 2021 Canadian Agricultural Economics Society.
- asset specificity
- buyer power
ASJC Scopus subject areas
- Global and Planetary Change
- Animal Science and Zoology
- Agronomy and Crop Science
- Economics and Econometrics