What Impact Are EU Supermarket Standards Having on Developing Countries Export of High-Value Horticultural Products? Evidence from Kenya

European Union (EU) retailers are setting global benchmarks for the production of fresh food, and are asking their suppliers for produce to be certified according to food safety and quality standards. Compliance to these standards for developing countries small-scale producers entail costly investment in variable inputs and long term structures. Limited empirical evidence exists either to refute or confirm the concern that the proliferation and enhanced stringency of these standards marginalize smallholders from global market. This article therefore explores the costs of compliance, factors explaining the smallholder decision to adopt EU private quality standard and the impacts of the standard on farm financial performance. We develop a two-stage standard treatment effect model to account for self-selection as a source of endogeneity. Analysis is based on a random cross section sample of 439 small-scale export vegetable producers in Kenya whose production was monitored in 2005/2006. We demonstrate that adopters and non-adopters are distinguishable by their asset holding and household wealth, access to services, labor endowment and level of education. Once we control for endogeneity problem, we found that small-scale producers can benefit substantially from adopting the standard at the farm level.