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As You Sow, So Shall You Reap: The Welfare Impacts of Contract Farming

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  • Bellemare, Marc F.

Abstract

What is the impact of participation in commodity chains on producer welfare? Contract farming – wherein a processing firm delegates its production of agricultural commodities to growers – is often viewed as a means of increasing grower welfare in developing countries. Because the nonrandom participation of growers in contract farming has so far not been dealt with convincingly, whether participation in contract farming increases welfare is up for debate. This paper uses the results of a contingent valuation experiment to estimate willingness to pay to enter contract farming, which is then used to control for actual participation in contract farming. Using data from Madagascar, results indicate that contract farming entails a 12- to 18-percent increase in income; a 16-percent decrease in income volatility; a two-month decrease in the duration of the hungry season; and a 30-percent increase in the likelihood that a household receives a formal loan.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 23638.

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Date of creation: 03 Jul 2010
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Handle: RePEc:pra:mprapa:23638

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Keywords: Contract Farming; Welfare; Grower-Processor Contracts; Outgrower Schemes;

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  2. Trudy Ann Cameron & Michelle D. James, 1986. "Efficient Estimation Methods for "Closed-Ended" Contingent Valuation Surveys," UCLA Economics Working Papers 404, UCLA Department of Economics.
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  5. Porter, Gina & Phillips-Howard[malt], Kevin, 1997. "Comparing contracts: An evaluation of contract farming schemes in Africa," World Development, Elsevier, vol. 25(2), pages 227-238, February.
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  7. John A. List & Sally Sadoff & Mathis Wagner, 2009. "So you want to run an experiment, now what? Some Simple Rules of Thumb for Optimal Experimental Design," Carlo Alberto Notebooks 125, Collegio Carlo Alberto.
  8. Minten, B. & Randrianarison, L. & Swinnen, Jo, 2009. "Global retail chains and poor farmers: Evidence from Madagascar," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/203085, Katholieke Universiteit Leuven.
  9. Thomas Reardon & C. Peter Timmer & Christopher B. Barrett & Julio Berdegué, 2003. "The Rise of Supermarkets in Africa, Asia, and Latin America," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(5), pages 1140-1146.
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  11. Minot, Nicholas, 1986. "Contract Farming and Its Effect on Small Farmers in Less Developed Countries," Food Security International Development Working Papers 54740, Michigan State University, Department of Agricultural, Food, and Resource Economics.
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  14. Miet Maertens, 2008. "Horticulture Exports, Agro-industrialization and Farm-nonfarm Linkages with the Smallholder Farm Sector: Evidence from Senegal," LICOS Discussion Papers 21408, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
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  1. As You Sow, So Shall You Reap: The Welfare Impacts of Contract Farming
    by Marc F. Bellemare in Marc F. Bellemare on 2012-05-08 09:00:08
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Cited by:
  1. Swinnen, Jo & Vandeplas, Anneleen, 2009. "Rich consumers and poor producers: quality and rent distribution in global value chains," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/255644, Katholieke Universiteit Leuven.
  2. Sudha Narayanan, 2012. "The Heterogeneous welfare impacts of participation in contract farming schemes: Evidence from Southern India," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2012-019, Indira Gandhi Institute of Development Research, Mumbai, India.
  3. Céline Guimas, 2012. "Effect of organic contract farming on labor demand. A study case in the Western Uganda," Post-Print dumas-00802135, HAL.
  4. Sudha Narayanan, 2012. "Safe gambles? Farmer perceptions of transactional certainty and risk-return tradeoffs in contract farming schemes in Southern India," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2012-021, Indira Gandhi Institute of Development Research, Mumbai, India.

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