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Assessing the Impact of the Jepara Furniture Value Chain Project

Corinna Clements

Thesis submitted to the faculty of the Virginia Polytechnic Institute and State University

in partial fulfillment of the requirements for the degree of

Master of Science

In

Agricultural and Applied Economics

Jeffrey R. Alwang, Committee Chair

Daniel Suryadarma

Bradford F. Mills

July 25, 2016

Blacksburg, VA

Keywords:

propensity score matching, value chain, furniture, producer association, Indonesia

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Assessing the Impact of the Jepara Furniture Value Chain Project

Corinna Clements

ABSTRACT

This thesis assesses the impact of the Jepara Furniture Value Chain (FVC) project, which

was conducted by the Center for International Forestry Research (CIFOR) to address

challenges faced by small-scale furniture producers in Jepara, Indonesia. This assessment

focuses on the effect of membership in the APKJ, a producer association started as part of

the project. The propensity score for association membership was estimated using

unchanging firm and owner characteristics, as well as information recalled about firm

operations in 2009 (before the association was formed). Propensity score matching was

used to compare outcome variables of association members and non-members. Results

suggest that membership in the APKJ does not have a significant effect on profit levels.

Using differenced current and recalled marketing and production behaviors as outcome

variables with propensity score matching indicates that members have improved their

bargaining position and marketing behaviors more than non-members since 2009.

Additionally, APKJ members are more likely to have obtained certificates of timber

legality

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Acknowledgements

I would like to thank the Standing Panel on Impact Assessment of the CGIAR consortium

for funding this research through the project titled Strengthening Impact Assessment in

the CGIAR: New partnerships for building impact. Many thanks go to the Center for

International Forestry Research (CIFOR) for the opportunity to work with researchers at

CIFOR to conduct this research, and for supporting survey administration.

I would like to express my deep appreciation for my advisor and committee chair, Dr.

Jeff Alwang, for patiently guiding me through research and writing while challenging me

to think creatively and critically. You always invested the time to provide the feedback

that allowed me to learn and improve, and for that I am very grateful. I want to thank my

committee member Dr. Brad Mills. Your advice on surveying and propensity score

matching was immensely helpful. . Also thanks to Dr. Wen You for guidance on

propensity score matching. I am very thankful for the input that Dr. Daniel Suryadarma

provided on sample selection and the many iterations of the questionnaire. Thank you for

guiding me through preparing for survey administration and for making me feel welcome

at CIFOR.

I cannot thank Ramadhani Achdiawan enough for his essential role in developing and

testing the questionnaire, recruiting and training enumerators, and overseeing survey

administration. I also want to thank Sulthon M. Amin for recruiting enumerators from

Jepara, teaching me about furniture making and the APKJ, and assisting in overseeing

survey administration. I want to thank all of my enumerators, Vivi, Finanda, Ruli, Sorif,

Sinung, Arfan, Karwadi, and Nonik, and in particular Muhamad Risman and Rohazim

Anambas, who helped with translations and data entry in addition to interviewing. Thank

you to all of you; I greatly appreciate your hard work, and value your friendship. I also

want to thank Ibu Elfy for welcoming me into Situ Gede and making me feel at home.

I would also like to thank all my friends, particularly Brittany Castle, Kristen Clermont,

Lauren Pichon, Lauren Garcia, Stephanie Myrick and Bryan Lehner for reminding me to

have perspective and for listening to me ramble about topics such as calipers and

covariate balance. I am immensely grateful to my family for their constant support,

especially my Mom. Thank you for always being there for me, for calming me when I

was anxious, and for persistently believing in me.

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Table of Contents

ABSTRACT .................................................................................................................................... ii

Acknowledgements ........................................................................................................................ iii

Table of Contents ........................................................................................................................... iv

Chapter 1: Introduction ................................................................................................................... 1

1.1 Problem Statement and Objectives ....................................................................................... 1

1.2 Methods and Hypotheses ...................................................................................................... 3

1.3 Overview of thesis ................................................................................................................ 5

Chapter 2: Background ................................................................................................................... 6

2.1 The Jepara Furniture Value Chain Project ............................................................................ 6

2.2 The Jepara Furniture Value Chain ........................................................................................ 7

2.3: Project implementation ...................................................................................................... 13

Chapter 3: Methods ....................................................................................................................... 17

3.1 Conceptual Framework and Empirical Model .................................................................... 17

3.2 Data Collection and the Survey Instrument ........................................................................ 22

3.2.1 The Survey Instrument ................................................................................................. 24

3.2.2 Sample Selection .......................................................................................................... 25

3.3 Data ..................................................................................................................................... 28

3.3.1 Comparing recall responses with data from previous survey ...................................... 28

3.3.1 Covariates .................................................................................................................... 29

3.3.2 Outcome Variables....................................................................................................... 40

Chapter 4: Analysis and Results ................................................................................................... 45

4.1: Implementing Empirical Methods ..................................................................................... 45

4.2: Checking Common Support and Covariate Balance Assumptions ................................... 47

4.3: Hypotheses and Results ..................................................................................................... 51

4.3.1: Hypothesis 1: APKJ members realize higher profits than non-members with similar

attributes ................................................................................................................................ 51

4.3.2: Hypothesis 2: APKJ members have a higher probability than non-members of

increasing the sophistication of their marketing methods between 2009 and 2015 ............. 57

4.3.3: Hypothesis 3: APKJ members are more likely than non-members to have upgraded

their production activities since 2009 ................................................................................... 65

4.3.4: Hypothesis 4: APKJ members are more likely than non-members to have good

business management practices ............................................................................................ 67

4.3.5: Revenue Predictors and Staying Open versus Shutting Down ................................... 69

4.4: Qualitative Survey Responses ........................................................................................... 72

4.5: Conclusion and Limitations ............................................................................................... 73

Chapter 5: Discussion ................................................................................................................... 75

References ..................................................................................................................................... 79

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Appendix A: Survey Questionnaire .............................................................................................. 82

Appendix B: Balance Tests ...............................................................................