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Contract farming and technical efficiency: Evidence from low†value and high†value crops in Nepal

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  • Ashok K. Mishra
  • Saleem Shaik
  • Aditya R. Khanal
  • Subir Bairagi

Abstract

Contract farming (CF), an institutional innovation, can reduce transaction costs and solve market imperfections in many developing countries. This study compares productivity and technical efficiency (TE) of contract and independent producers of high yielding variety (HYV) paddy seed (a low†value crop) and ginger (a high†value crop) producers in a sample of smallholders in Nepal. We address the self†selection into CF by using propensity score matching and translog stochastic frontier function to estimate our empirical model. Using farm†level data from Nepal, our findings show that CF increased the average TE levels of HYV paddy seed producers from 87% to 94% and the average TE levels of ginger producers from 89% to 97%. Finally, we find that human capital and distance to the market increases the technical inefficiency of low†value crop smallholders in Nepal. [EconLit citations: C21, O13, Q12].

Suggested Citation

  • Ashok K. Mishra & Saleem Shaik & Aditya R. Khanal & Subir Bairagi, 2018. "Contract farming and technical efficiency: Evidence from low†value and high†value crops in Nepal," Agribusiness, John Wiley & Sons, Ltd., vol. 34(2), pages 426-440, March.
    • Handle: RePEc:wly:agribz:v:34:y:2018:i:2:p:426-440
    DOI: 10.1002/agr.21533
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    7. Khanal, Aditya R. & Mishra, Ashok K., 2018. "Impacts of contract farming decisions on high value crop production of smallholder Nepalese farmers: A multinomial endogenous switching regression approach," 2018 Annual Meeting, August 5-7, Washington, D.C. 274366, Agricultural and Applied Economics Association.
    8. Neubauer, Florian & Songsermsawas, Tisorn & Kámiche-Zegarra, Joanna & Bravo-Ureta, Boris E., 2022. "Technical efficiency and technological gaps correcting for selectivity bias: Insights from a value chain project in Nepal," Food Policy, Elsevier, vol. 112(C).
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