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Working Paper 288 - Return to Investment in Agricultural Cooperatives in Ethiopia
In an effort to increase smallholder participation in commodity markets, the World Food Program (WFP) recently implemented five-year Purchase for Progress (P4P) pilot projects in 20 countries. The projects involved investing in physical and human capacities of Farmer Organizations (FOs) to aggregate commodities and add value as well as locally purchasing food aid from the same, the combination of which provided smallholders with value-added forward markets for their staple crop. In this study, using the Ethiopian survey data, we estimated a causal income and distributive effects of the Ethiopian P4P intervention among smallholders. Using a semi-parametric difference-in-difference (DID) model, which relaxes the parallel trend assumption, we show that the P4P intervention has raised per capita consumption of smallholders. Estimates of the treatment effect from alternative specifications of our preferred models ranged between Ethiopian Birr (ETB) 188.3 and ETB 248.6 (15.10% and 19.93%). Moreover, our analysis suggests heterogeneous treatment effects related to elite capture within Farmer Organizations. Policy implications are discussed.