Researchers of LEI Wageningen UR, Wageningen University and the Ethiopian Institute of Agricultural Research have found that the Ethiopian Commodity Exchange (ECX) replaces social capital of traders. Their findings will be published in the December issue of Food Policy.

The study by Gerdien Meijerink, Prof Erwin Bulte and Dawit Alemu explores whether the creation of the Ethiopian Commodity Exchange (ECX) and its formal monitoring and enforcement institutions has affected social capital and trust in the Ethiopian segment of the sesame value chain. Consistent with a simple theoretical marketing model, the panel data suggest this is indeed the case.

Trade in sesame is increasingly governed by formal rather than informal institutions, and in response traders have broadened their trading network, rely more frequently on traders with whom they do not have social relations, and have reduced the provision of credit that cements personalized relationships. They also have lower levels of trust in the intentions and capabilities of their trading partners, and attach less weight to trust.

More information can be found in the paper'The interaction of formal and informal institutions in development: The Ethiopian Commodity Exchange and social capital in sesame markets' by G. Meijerink, E. Bulte and D. Alemu, presented at the 2013 Conference of the International Society for New Institutional Economics (ISNIE) in Florance, Italy.

For the publication in Food Policy (in progress), please click here.

Photo: The Ethiopian Commodity Exchange