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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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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. 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.
  2. Narayanan, Sudha, 2014. "Profits from participation in high value agriculture: Evidence of heterogeneous benefits in contract farming schemes in Southern India," Food Policy, Elsevier, Elsevier, vol. 44(C), pages 142-157.
  3. Barrett, Christopher B. & Bachke, Maren E. & Bellemare, Marc F. & Michelson, Hope C. & Narayanan, Sudha & Walker, Thomas F., 2012. "Smallholder Participation in Contract Farming: Comparative Evidence from Five Countries," World Development, Elsevier, Elsevier, vol. 40(4), pages 715-730.
  4. Abebe, Gumataw K. & Bijman, Jos & Kemp, Ron & Omta, Onno & Tsegaye, Admasu, 2013. "Contract farming configuration: Smallholders’ preferences for contract design attributes," Food Policy, Elsevier, Elsevier, vol. 40(C), pages 14-24.
  5. Barrett, Christopher B. & Bachke, Maren E. & Bellemare, Marc F. & Michelson, Hope C. & Narayanan, Sudha & Walker, Thomas F., 2010. "Smallholder Participation in Agricultural Value Chains: Comparative Evidence from Three Continents," MPRA Paper 27829, University Library of Munich, Germany.
  6. 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.
  7. Gómez, Miguel I. & Ricketts, Katie D., 2013. "Food value chain transformations in developing countries: Selected hypotheses on nutritional implications," Food Policy, Elsevier, Elsevier, vol. 42(C), pages 139-150.
  8. Bellemare, Marc F. & Holmberg, Andrew M., 2010. "The Determinants of Music Piracy in a Sample of College Students," MPRA Paper 23641, University Library of Munich, Germany.
  9. Michelson, Hope C., 2012. "Small farmers, NGOs, and a Walmart World: Welfare effects of supermarkets operating in Nicaragua," MPRA Paper 42458, University Library of Munich, Germany.
  10. Neda Trifković, 2013. "Governance Strategies and Welfare Effects: Vertical Integration and Contracts in the Catfish Sector in Vietnam," IFRO Working Paper 2013/20, University of Copenhagen, Department of Food and Resource Economics.
  11. Linda Kleemann & Awudu Abdulai & Mareike Buss, 2013. "Is Organic Farming Worth its Investment? The Adoption and Impact of Certified Pineapple Farming in Ghana," Kiel Working Papers 1856, Kiel Institute for the World Economy.
  12. Céline Guimas, 2012. "Effect of organic contract farming on labor demand. A study case in the Western Uganda," Post-Print, HAL dumas-00802135, HAL.

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