Farm- and market-level determinants of the effectiveness of aggregation service-based market interventions: evidence from vegetable farmers in Bangladesh

Abstract

Smallholder farmers form the backbone of agri-food systems and economic development in many developing countries. Yet, most remain trapped in subsistence farming due to persistent market inefficiencies. This study evaluates the effectiveness of market interventions in enhancing farm-level profitability and market-level profit margins for smallholder vegetable farmers through aggregation and improved market access. A cross-sectional survey of 360 vegetable farmers was analyzed using a two-step analytical framework comprising Generalized Linear Latent and Mixed Models (GLLAMM) and Weighted Least Square (WLS) approaches, applied separately at the farm and market levels. The findings indicate that participation in the LOOP program significantly increases profitability and profit margins by strengthening market connectivity, reducing transaction costs, and improving access to price information. Conversely, higher vegetable production costs per decimal are negatively associated with profit margins, highlighting the importance of cost management in sustaining profitability. On the other hand, LOOP farmers who use leased land are more likely to make a profit with a greater number of vegetable production. The effects of market distance are mixed: proximity to upazila centers boosts profit margins, while greater distance from district roads reduces profitability due to elevated transportation costs and price fluctuation. Interestingly, education, road quality, and wealth indicators show no significant impact on profitability, suggesting that practical skills and market dynamics outweigh formal socio-economic characteristics. By integrating farm-level and market-level analyses within a single empirical framework, this study provides a more comprehensive understanding of the effectiveness of aggregation service-based market intervention. The findings underscore the importance of scaling up aggregation schemes alongside investments in rural market information systems, and cost-reduction strategies to enhance profitability and market integration of smallholder farmers.