Market-driven production with transaction costs outlook: Gum arabic collection systems in Senegal

Abstract

JEL classification: D24 Q12 Q13 Q23Keywords: Transaction costs Market-led production Alternative-specific probit model Semi-arid lands Gum arabic a b s t r a c t Low returns from marketing of non-timber forest products such as gum arabic restrict the collection of these products. A hypothesis is tested that access to good markets motivates collectors to harvest and market gum arabic. Analyses of the choice of participation in group marketing, sale price, quantity of gum collected and the final choice of market outlet are done. Decision outcomes include fixed transaction costs at the collection stage and proportional costs at the marketing stage. Original data from 348 gum collectors in the Sylvopastoral zone and Eastern region of Senegal were used. Results confirm the stated hypothesis; indeed the marketing context and outcome play a big role in collection systems of gum arabic in Senegal. The costs incurred in finding the good market can be regarded as an investment, whereby the collector may continue to transact with the same trading partner (and hence in the same market). The need for infrastructural development, strengthening groups and market expansion are emphasised as key policy interventions.