Large-scale farms in Zambia: Locational patterns and spillovers to smallholder agriculture

The accelerated growth of large-scale farming operations in developing countries, in particular Africa, has raised concerns that smallholders may be negatively affected. Drawing on nationally representative smallholder data and a census of large-scale farms in Zambia, this study investigates spillovers from large-scale farms to smallholders. First, we conceptually discuss potential spillovers from larg-scale farms to smallholders and sources of spillover heterogeneity. Second, we analyze the large-scale farm sector and its locational pattern. Large-scale farms operate in areas with good infrastructure and market access, i.e. in proximity to smallholders. Third, we adopt a difference-in-differences approach to estimate the spillovers of large-scale farms to smallholders’ area cultivated, access to fertilizer, and maize yields. We observe that the establishment of large-scale farms has little effect on average farm sizes of smallholders. However, we find a strong shift of crop portfolios towards maize among smallholders near recently established large-scale farms to the detriment of other staple crops. We do not find any spillovers on fertilizer adoption by smallholder farmers but large positive effects on maize yields. The locational pattern suggest that large-scale farms compete with smallholders for land. In sum, it is crucial not to overestimate the development potential of large-scale farms. Instead, immediate threats to smallholders need to be addressed, in particular through securing land tenure rights. Further, the mechanisms of spillovers need to be better understood in order to design infrastructure and agricultural extension policies that can complement and reinforce positive spillovers from large-scale farms and mitigate potential negative spillovers including environmental impacts.