The hold-up problem in China's broiler industry: Empirical evidence from Jiangsu Province

Shufen Tang, Yuqing Zheng, Taiping Li, Li Zhou

Research output: Contribution to journalArticlepeer-review

Abstract

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.

Original languageEnglish
Pages (from-to)539-554
Number of pages16
JournalCanadian Journal of Agricultural Economics
Volume69
Issue number4
DOIs
StatePublished - Dec 2021

Bibliographical note

Publisher Copyright:
© 2021 Canadian Agricultural Economics Society.

Keywords

  • asset specificity
  • broiler
  • buyer power
  • hold-up
  • integrator

ASJC Scopus subject areas

  • Global and Planetary Change
  • Ecology
  • Animal Science and Zoology
  • Agronomy and Crop Science
  • Economics and Econometrics

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