Constraints to small-grower investment in coffee production in the Eastern Highlands of Papua New Guinea

Abstract

Coffee is Papua New Guinea's second-largest export crop and the main source of income for more than 50 per cent of the country's households with more than 2.5 million small coffee growers. This article examines constraints to small-grower coffee production in the Highlands region. Data gathered in a multi-stage sample of 150 small coffee growers were used to estimate a logit model of investment in seasonal inputs applied to coffee. Liquidity was found to be the most important determinant of investment, followed by family farm labour, transaction costs, formal education and informal taxes imposed by the wantok system. Visits from extension staff did not have a significant impact on investment. It was not possible to test for the effects of land tenure security as virtually all the sample households suffered from insecure tenure. Improving the physical infrastructure in rural Papua New Guinea would help to reduce high transaction costs that constrain markets, including the rural financial market.