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Do Production Contracts Raise Farm Productivity? An Instrumental Variables Approach

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  • Key, Nigel
  • McBride, William D.

Abstract

Estimating how the use of production contracts affects farm productivity is difficult when unobservable factors are correlated with both the decision to contract and productivity. To account for potential selection bias, this study uses the local availability of production contracts as an instrument for whether a farm uses a contract in order to estimate the impact of contract use on total factor productivity. Results indicate that use of a production contract is associated with a large increase in productivity for feeder-to-finish hog farms in the United States. The instrumental variable method makes it credible to assert that the observed association is a causal relationship rather than simply a correlation.

Suggested Citation

  • Key, Nigel & McBride, William D., 2008. "Do Production Contracts Raise Farm Productivity? An Instrumental Variables Approach," Agricultural and Resource Economics Review, Cambridge University Press, vol. 37(2), pages 176-187, October.
    • Handle: RePEc:cup:agrerw:v:37:y:2008:i:02:p:176-187_00
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    References listed on IDEAS

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    Cited by:

    1. Xiaoheng Zhang & Ping Qing & Xiaohua Yu, 2019. "Short supply chain participation and market performance for vegetable farmers in China," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 63(2), pages 282-306, April.
    2. Xiaoheng Zhang & Feng Chu & Xiaohua Yu & Yingheng Zhou & Xu Tian & Xianhui Geng & Jinyang Yang, 2017. "Changing Structure and Sustainable Development for China’s Hog Sector," Sustainability, MDPI, vol. 9(1), pages 1-15, January.
    3. Martins, Franco Müller & Trienekens, Jacques & Omta, Onno, 2021. "Impact of buyers' support on farmer performance and investments in the Brazilian pork supply chain," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 25(1), July.
    4. Briones, Roehlano M., 2015. "Small Farmers in High-Value Chains: Binding or Relaxing Constraints to Inclusive Growth?," World Development, Elsevier, vol. 72(C), pages 43-52.
    5. Nigel Key & William D. McBride, 2014. "Sub-therapeutic Antibiotics and the Efficiency of U.S. Hog Farms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(3), pages 831-850.
    6. Rachael Goodhue & Leo Simon, 2016. "Agricultural contracts, adverse selection, and multiple inputs," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 4(1), pages 1-33, December.
    7. Frasa, Stefanie & Carlberg, Jared & Hogan, Robert, 2015. "Use of Contracts by Prairie Agricultural Producers," Working Papers 232328, Structure and Performance of Agriculture and Agri-products Industry (SPAA).
    8. Key, Nigel D. & McBride, William D., 2007. "The Changing Economics of U.S. Hog Production," Economic Research Report 6389, United States Department of Agriculture, Economic Research Service.
    9. McBride, William D. & Key, Nigel, 2013. "U.S. Hog Production From 1992 to 2009: Technology, Restructuring, and Productivity Growth," Economic Research Report 262217, United States Department of Agriculture, Economic Research Service.
    10. Ba, Hélène A. & de Mey, Yann & Thoron, Sylvie & Demont, Matty, 2019. "Inclusiveness of contract farming along the vertical coordination continuum: Evidence from the Vietnamese rice sector," Land Use Policy, Elsevier, vol. 87(C).

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