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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 agricultural value chains on the welfare of smallholders? Contract farming, wherein a processing firm delegates its production of agricultural commodities to growers, is often viewed as a means of increasing smallholder welfare in developing countries. Because the problem posed by the nonrandom participation of grower smallholders in contract farming has so far not been dealt with convincingly, however, whether participation in contract farming actually increases smallholder welfare is still up for debate. This paper uses an experimentally derived nonparametric measure of willingness to pay to enter contract farming to control for actual participation in contract farming. Using data from Madagascar, results indicate that participation in contract farming is associated with a 10- to 16-percent increase in income; a 15-percent decrease in income volatility; a two-month decrease in the duration of the hungry season; and a 31-percent increase in the likelihood of receiving a formal loan.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 27259.

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Date of creation: 03 Jul 2010
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Handle: RePEc:pra:mprapa:27259

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

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  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.
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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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As found by EconAcademics.org, the blog aggregator for Economics research:
  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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