6 - Designing Effective Private Institutions

Summary

Chapter 6 compares the outcome additionality of thirty-two indicators in a quantitative meta-analysis, and tests hypotheses derived from an inductive theoretical analysis of micro-institutional dynamics. It examines the comparative impact of regulatory clarity and stringency; effective training and capacity building; the existence of significant, individualized price premiums; the presence of investment and opportunity costs; restrictive auditor oversight policies; and the coexistence of public regulation on the likelihood that a requirement will show outcome additionality in matched farmers. The results show that regulatory clarity and stringency, along with the provision of substantive price premiums, have the most significant positive correlation with outcome additionality (i.e., likely behavior changes); while the coexistence of public regulations and the existence of high opportunity costs has a significant negative impact. These results are striking, as the majority of standards are currently moving away from a stringent regulatory approach. However, this approach is unlikely to allow for the creation of price premiums that could compensate farmers for high-cost practices.