Contracting and quality upgrading: evidence from an experiment in Senegal
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We conduct a randomized experiment with groundnut producers in Senegal to address barriers to quality upgrading and access to international markets. We offer a bundled flexible contract that provides credit, training, and a price premium guarantee to encourage use of a new quality-improving technology. Producers randomly offered the contract are significantly more likely to purchase the technology. In areas where quality is otherwise lower due to agro-climatic conditions, producers are significantly more likely to comply with international standards. Adoption falls two years after our intervention when a price premium guarantee is no longer available, but remains persistently higher among previously-treated producers. We find that producers change their commercialization behavior when the contract is active, opting to sell more to cooperatives and less to other buyers, but this change is small in magnitude and does not persist to the subsequent season.