Exploring the role of pesticide traders in protecting farmers' benefit

• Published date: 01 November 2023
• Author: Khondoker A. Mottaleb,Dil Bahadur Rahut,Shamim Shakur
• Date: 01 November 2023
• DOI: http://doi.org/10.1111/rode.13019

REGULAR ARTICLE

Exploring the role of pesticide traders in

protecting farmers' benefit

Khondoker A. Mottaleb

1

| Dil Bahadur Rahut

2

|

Shamim Shakur

3

1

Agricultural Economics and

Agribusiness Department, University of

Arkansas, Fayetteville, Arkansas, USA

2

Asian Development Bank Institute

(ADBI), Tokyo, Japan

3

School of Economics and Finance, Social

Science Tower, Room 4.22, Massey

University, Palmerston North,

New Zealand

Correspondence

Khondoker A. Mottaleb, Agricultural

Economics and Agribusiness

Department, University of Arkansas,

AGRI Building, Fayetteville, AR 72701,

USA.

Email: mottaleb@uark.edu

Abstract

Owing to the inadequacy of the public extension

services, farmers in developing countries often rely on

the suggestions of agricultural input traders. As profit-

making agents, these traders, in their turn, may have

an incentive to exploit farmers by suggesting relatively

expensive inputs. In this study, the Endogenous

Switching Regression (ESR) estimation method is

applied to demonstrate that input traders in many

waysplaythesubstituteroleofthepublicextension

agents in a developing country. In the process, this

study relied on primary information collected from

379 farmers in Bangladesh in two seasons (N=758).

Then the ESR estimation procedure is applied to pre-

dict farmer's expenditure on pesticides, conditional on

whetherornottheyrelyontraders'advice.Findings

of this study suggest that pesticide expenditures are

not statistically different between the farmers that rely

on traders' suggestions and those that do not. The

study thus concludes that by providing unbiased,

useful information to the client farmers, profit-

maximizing agricultural input traders render the

services of public extension workers, which corrects

possible market failures.

KEYWORDS

Bangladesh, environment, endogenous switching regression,

pesticide trader

Received: 17 August 2020 Revised: 6 April 2023 Accepted: 5 June 2023

DOI: 10.1111/rode.13019

2248 © 2023 John Wiley & Sons Ltd. Rev Dev Econ. 2023;27:2248–2270.wileyonlinelibrary.com/journal/rode

JEL CLASSIFICATION

D820, Q120, Q160

1|INTRODUCTION

Owing to the inadequacy of public extension services, farmers in developing countries often rely

on agricultural-input traders for advice on input usage, such as input type, quantity to be

applied and application timing (Mottaleb et al., 2019; Rahaman et al., 2018). However, traders

are commercial profit-making agents. With the presence of asymmetric information, in which

traders possess more knowledge on inputs, traders may have an incentive to exploit farmers by

suggesting excessive use of relatively expensive inputs.

1

Such profit-maximizing behavior of the

traders can be viewed as a principal-agent problem, which can be mitigated partly through a

mutual trust through repeated transactions between the farmers (principal) and the traders

(agent) in a strong social relationship (Arrow, 1963; Otsuka & Hayami, 1988). Studies also sug-

gest that by disseminating useful market information, the traders can also reduce search and

transaction costs both in the farm (Key & Runsten, 1999; Miyata et al., 2009) and non-farm sec-

tors (Hayami & Kawagoe, 1993; Mottaleb & Sonobe, 2011). Particularly in the farm sector,

traders' role can be beneficial in protecting farmers' benefit (Mottaleb et al., 2019).

Empirical studies are scanty on examining whether agricultural input traders in developing

countries exploit farmers or provide farmers with market information that ensures farmers' ben-

efits. Using the fertilizer application in Bangladesh as a case, Mottaleb et al. (2019) demon-

strated that rural fertilizer traders in Bangladesh are not exploitative. Rather, the rural fertilizer

traders provide necessary and useful information to the farmers on the type of fertilizer to be

applied, doses and timing, similar to the government agricultural extension agents (Mottaleb

et al., 2019). The application of pesticides, however, requires specific information and knowl-

edge on the type of pesticides, doses and timing. Farmers in Bangladesh rely on input traders

for advice due to the shortage of the government agricultural extension agents. A question

arises as to, in the presence of information asymmetry, do the rural pesticides traders in

Bangladesh exploit farmers or provide useful market information?

Using information collected from 379 rice farmers in Bangladesh in the 2012–13 and

2013–14 boro rice seasons, this study examines the influence of pesticide traders in Bangladesh

on farmers' pesticides application behavior. Particularly, this study examines whether or not

pesticides traders exploit farmers by suggesting relatively expensive and excessive pesticides to

them. In examining the fact, the study estimates expenditures on pesticides of the sampled

farmers, based on whether or not they rely on traders or other sources of information, such as

government extension agents, own experiences, or suggestions of neighboring farmers (peer

experience) in deciding pesticide applications.

Examining the issue is important for several reasons. First, in 1975, Bangladesh was blamed

for using lower amounts of pesticides than the required amounts (Wilcoxson et al., 1975). In

contrast, with a 1.57 kg/ha pesticides application rate in the agriculture sector, Bangladesh is

the highest pesticides applying countries in South Asia in 2020 (FAOSTAT, 2021). Empirical

studies confirmed that pesticide traders are the primary source of information to farmers in

deciding pesticide application in Bangladesh (Mottaleb et al., 2019; Rahaman et al., 2018;

Rashid et al., 2003). The study of Rashid et al. (2003) claimed that farmers who relied on pesti-

cide traders, or government extension agents for information, overuse and misuse pesticides,

MOTTALEB ET AL.2249