Food quality in domestic markets of developing economies: a comparative study of two countries

Food quality has become an important determinant of success in global food trade and growers for international markets have to continuously adjust to buyers' requirements. It is, however, not clear to what extent there is a demand for food qualityand how much buyers are willing to pay for itin domestic food markets of developing economies. Based on unique comparable price and trader data in a poor country in Africa (Madagascar) and an emerging economy in Asia (India), we compare food quality and quality's pricing. We find significantly better quality and higher quality premiums (using revealed as well as stated preference methods) in India than in Madagascar. These findings are consistent with a simple theoretical model, solely based on average income gaps between the two countries.