Macroeconomics

Sugar mills: Ownership, productivity and crop choice

  • Blog Post Date 28 February, 2011
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This project examines the effect of firm ownership structure on firm behaviour and the economic outcomes of upstream suppliers by comparing privately-owned sugar mills to cooperatives and public mills in India. In this setting, government support for cooperative and public mills allows meaningful variation in ownership structure to be observed, while the 'command area' zoning system – whereby mills are given monopoly power to operate within an assigned area helps tackle the identification challenge. Using satellite images overlaid on digital maps to measure sugarcane grown along the borders, and a survey to determine the effects of crop choices on farmer welfare, the results show that private mills encourage sugarcane production. Greater cane cultivation is tied to better credit provided by private mills, and results in higher income and consumption for land-poor farmers.

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