The role of market institutions in trade and economic development in Africa

This chapter contributes to the supply and value chain literature by examining how local commodity exchanges in Africa have co-ordinated the various actors in the commodity markets and the subsequent impacts of this co-ordination on transaction costs. It also examines the value added to the agriculture marketing system. Specifically, the authors use a percentage change analysis and an ordered logit approach to examine the Ethiopian Commodity Exchange (ECX). They found that the ECX helps to reduce transaction costs and improves farmers’ profits by reducing the number of intermediaries involved in coffee trading. Results from the percentage analysis and the ordered logit all confirm that the ECX has a positive impact on the Ethiopian trading system, thereby adding value to the agricultural marketing system.