IDEAS home Printed from https://ideas.repec.org/a/eee/jfpoli/v62y2016icp110-121.html
   My bibliography  Save this article

Impact of contracts in high yielding varieties seed production on profits and yield: The case of Nepal

Author

Listed:
  • Mishra, Ashok K.
  • Kumar, Anjani
  • Joshi, Pramod K.
  • D'souza, Alwin

Abstract

Nepal’s population continues to grow, but the agricultural sector’s performance remains almost stagnant. This has led to a decline in the per capita availability of food. Increasing agricultural productivity is the key to agricultural growth, and one strategy for increasing agricultural productivity is to use improved seeds. This study investigates the impact of contract farming (CF) in high yielding varieties (HYV) of paddy seed production on costs, yield, and profits of smallholder farms in Nepal. Using farm-level data and a non-parametric propensity score matching estimator, the study finds a significant positive impact of contract HYV seed farming on revenues, profits, and yield, and a significant negative impact on total costs of production. Additionally, very small farms (⩽0.43ha) with CF in HYV paddy seeds tend to gain the most when it comes to yield per hectare. Our estimates reveal that the average smallholder household in Nepal engaged in CF with input conditions receives higher profits. However, farmers engaged in CF with output conditions tend to have higher yields but smaller profits. Finally, farmers engaged in CF in HYV paddy seeds with both input and output conditions have the highest yield gains and significantly higher profits.

Suggested Citation

  • Mishra, Ashok K. & Kumar, Anjani & Joshi, Pramod K. & D'souza, Alwin, 2016. "Impact of contracts in high yielding varieties seed production on profits and yield: The case of Nepal," Food Policy, Elsevier, vol. 62(C), pages 110-121.
  • Handle: RePEc:eee:jfpoli:v:62:y:2016:i:c:p:110-121
    DOI: 10.1016/j.foodpol.2016.05.005
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0306919216300410
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.foodpol.2016.05.005?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Marc F. Bellemare & Lindsey Novak, 2017. "Contract Farming and Food Security," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 99(2), pages 357-378.
    2. A. Smith, Jeffrey & E. Todd, Petra, 2005. "Does matching overcome LaLonde's critique of nonexperimental estimators?," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 305-353.
    3. Birthal, Pratap S. & Joshi, P. K. & Gulati, Ashok, 2005. "Vertical coordination in high-value commodities," MTID discussion papers 85, International Food Policy Research Institute (IFPRI).
    4. Williamson, Oliver E, 1979. "Transaction-Cost Economics: The Governance of Contractural Relations," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 233-261, October.
    5. Wang, Sun Ling & Heisey, Paul & Schimmelpfennig, David & Ball, Eldon, 2015. "Agricultural Productivity Growth in the United States: Measurement, Trends, and Drivers," Economic Research Report 207954, United States Department of Agriculture, Economic Research Service.
    6. Loren W. Tauer, 2009. "Estimation of Treatment Effects of Recombinant Bovine Somatotropin Using Matching Samples," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 31(3), pages 411-423.
    7. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588.
    8. 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.
    9. Alberto Abadie & David Drukker & Jane Leber Herr & Guido W. Imbens, 2004. "Implementing matching estimators for average treatment effects in Stata," Stata Journal, StataCorp LP, vol. 4(3), pages 290-311, September.
    10. Uematsu, Hiroki & Mishra, Ashok K., 2012. "Organic farmers or conventional farmers: Where's the money?," Ecological Economics, Elsevier, vol. 78(C), pages 55-62.
    11. Marco Caliendo & Sabine Kopeinig, 2008. "Some Practical Guidance For The Implementation Of Propensity Score Matching," Journal of Economic Surveys, Wiley Blackwell, vol. 22(1), pages 31-72, February.
    12. Rajeev H. Dehejia & Sadek Wahba, 2002. "Propensity Score-Matching Methods For Nonexperimental Causal Studies," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 151-161, February.
    13. Maredia, Mywish K. & Howard, Julie A., 1998. "Facilitating Seed Sector Transformation in Africa: Key Findings from the Literature," Food Security International Development Policy Syntheses 11366, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    14. Mendola, Mariapia, 2007. "Agricultural technology adoption and poverty reduction: A propensity-score matching analysis for rural Bangladesh," Food Policy, Elsevier, vol. 32(3), pages 372-393, June.
    15. Paul Winters & Phil Simmons & Ian Patrick, 2005. "Evaluation of a Hybrid Seed Contract between Smallholders and a Multinational Company in East Java, Indonesia," Journal of Development Studies, Taylor & Francis Journals, vol. 41(1), pages 62-89.
    16. Barbara Sianesi, 2004. "An Evaluation of the Swedish System of Active Labor Market Programs in the 1990s," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 133-155, February.
    17. Zdenko Stefanides & Loren W. Tauer, 1999. "The Empirical Impact of Bovine Somatotropin on a Group of New York Dairy Farms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(1), pages 95-102.
    18. Dehejia, Rajeev, 2005. "Practical propensity score matching: a reply to Smith and Todd," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 355-364.
    19. Liu, Xiangping & Lynch, Lori, 2007. "Do Agricultural Preservation Programs Affect Farmland Conversion?," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon 9764, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    20. Phil Simmons & Paul Winters & Ian Patrick, 2005. "An analysis of contract farming in East Java, Bali, and Lombok, Indonesia," Agricultural Economics, International Association of Agricultural Economists, vol. 33(s3), pages 513-525, November.
    21. Guido W. Imbens & Jeffrey M. Wooldridge, 2009. "Recent Developments in the Econometrics of Program Evaluation," Journal of Economic Literature, American Economic Association, vol. 47(1), pages 5-86, March.
    22. Kassie, Menale & Shiferaw, Bekele & Muricho, Geoffrey, 2011. "Agricultural Technology, Crop Income, and Poverty Alleviation in Uganda," World Development, Elsevier, vol. 39(10), pages 1784-1795.
    23. Johan F. M. Swinnen & Miet Maertens, 2007. "Globalization, privatization, and vertical coordination in food value chains in developing and transition countries," Agricultural Economics, International Association of Agricultural Economists, vol. 37(s1), pages 89-102, December.
    24. Guido W. Imbens, 2004. "Nonparametric Estimation of Average Treatment Effects Under Exogeneity: A Review," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 4-29, February.
    25. 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, vol. 40(4), pages 715-730.
    26. Mahabub HOSSAIN & Manik L. BOSE & Bazlul A. A. MUSTAFI, 2006. "Adoption And Productivity Impact Of Modern Rice Varieties In Bangladesh," The Developing Economies, Institute of Developing Economies, vol. 44(2), pages 149-166, June.
    27. Govereh, Jones & Jayne, T. S., 2003. "Cash cropping and food crop productivity: synergies or trade-offs?," Agricultural Economics, Blackwell, vol. 28(1), pages 39-50, January.
    28. Glover, David J., 1984. "Contract farming and smallholder outgrower schemes in less-developed countries," World Development, Elsevier, vol. 12(11-12), pages 1143-1157.
    29. Austin Nichols, 2007. "Causal inference with observational data," Stata Journal, StataCorp LP, vol. 7(4), pages 507-541, December.
    30. James Heckman & Hidehiko Ichimura & Jeffrey Smith & Petra Todd, 1998. "Characterizing Selection Bias Using Experimental Data," Econometrica, Econometric Society, vol. 66(5), pages 1017-1098, September.
    31. Bellemare, Marc F., 2015. "Contract Farming: What’s In It for Smallholder Farmers in Developing Countries?," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 30(3), pages 1-4, September.
    32. Key, Nigel & Runsten, David, 1999. "Contract Farming, Smallholders, and Rural Development in Latin America: The Organization of Agroprocessing Firms and the Scale of Outgrower Production," World Development, Elsevier, vol. 27(2), pages 381-401, February.
    33. Haitao Wu & Shijun Ding & Sushil Pandey & Dayun Tao, 2010. "Assessing the Impact of Agricultural Technology Adoption on Farmers' Well‐being Using Propensity‐Score Matching Analysis in Rural China," Asian Economic Journal, East Asian Economic Association, vol. 24(2), pages 141-160, June.
    34. Singh, Sukhpal, 2002. "Contracting Out Solutions: Political Economy of Contract Farming in the Indian Punjab," World Development, Elsevier, vol. 30(9), pages 1621-1638, September.
    35. Wuepper, David & Sauer, Johannes, 2016. "Explaining the performance of contract farming in Ghana: The role of self-efficacy and social capital," Food Policy, Elsevier, vol. 62(C), pages 11-27.
    36. Aldas JANAIAH & Mahabub HOSSAIN & Keijiro OTSUKA, 2006. "Productivity Impact Of The Modern Varieties Of Rice In India," The Developing Economies, Institute of Developing Economies, vol. 44(2), pages 190-207, June.
    37. Sascha O. Becker & Andrea Ichino, 2002. "Estimation of average treatment effects based on propensity scores," Stata Journal, StataCorp LP, vol. 2(4), pages 358-377, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bairagi, Subir & Mishra, Ashok K. & Durand-Morat, Alvaro, 2020. "Climate risk management strategies and food security: Evidence from Cambodian rice farmers," Food Policy, Elsevier, vol. 95(C).
    2. Kosmowski, Frederic & Chamberlin, Jordan & Ayalew, Hailemariam & Sida, Tesfaye & Abay, Kibrom & Craufurd, Peter, 2021. "How accurate are yield estimates from crop cuts? Evidence from smallholder maize farms in Ethiopia," Food Policy, Elsevier, vol. 102(C).
    3. Mishra, Ashok K. & Khanal, Aditya R. & Pede, Valerien O., 2017. "Is direct seeded rice a boon for economic performance? Empirical evidence from India," Food Policy, Elsevier, vol. 73(C), pages 10-18.
    4. Khan, Muhammad Fawad & Nakano, Yuko & Kurosaki, Takashi, 2019. "Impact of contract farming on land productivity and income of maize and potato growers in Pakistan," Food Policy, Elsevier, vol. 85(C), pages 28-39.
    5. 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.
    6. Kedar, Vishnu & Kumar, Parmod & Neharkar, Pratibha, 2021. "Transaction Costs, Institutional Arrangements and Smallholders Participation: Tomato Marketing By Small Producers in India," 2021 Conference, August 17-31, 2021, Virtual 315151, International Association of Agricultural Economists.
    7. Otsuka, Keijiro & Ali, Mubarik, 2020. "Strategy for the development of agro-based clusters," World Development Perspectives, Elsevier, vol. 20(C).
    8. Vaiknoras, Kate A. & Larochelle, Catherine & Alwang, Jeffrey, 2020. "The spillover effects of seed producer groups on non-member farmers in local communities in Nepal," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304359, Agricultural and Applied Economics Association.
    9. Kumar, A. & Mishra, A. & Joshi, P. & D'Souza, A., 2018. "Impact of Contract Farming and Risk Preference on Food Security: The Case of Organic Basmati Rice Smallholders," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277008, International Association of Agricultural Economists.
    10. Kedar, Vishnu Shankarrao & Kumar, Parmod & Neharkar, Pratibha, 2021. "Transaction Costs, Institutions and Smallholder Market Integration: Chili Producers in India," 2021 Annual Meeting, August 1-3, Austin, Texas 313970, Agricultural and Applied Economics Association.
    11. Anette Ruml & Matin Qaim, 2021. "New evidence regarding the effects of contract farming on agricultural labor use," Agricultural Economics, International Association of Agricultural Economists, vol. 52(1), pages 51-66, January.
    12. Ashok K. Mishra & Anjani Kumar & Pramod K. Joshi & Alwin D'Souza, 2018. "Cooperatives, contract farming, and farm size: The case of tomato producers in Nepal," Agribusiness, John Wiley & Sons, Ltd., vol. 34(4), pages 865-886, October.
    13. Badria Hamed Al Ruqishi & Tarig Gibreel & Faical Akaichi & Lokman Zaibet & Slim Zekri, 2020. "Contractual agriculture: better partnerships between small farmers and the business sector in the sultanate of Oman," Asian Journal of Agriculture and rural Development, Asian Economic and Social Society, vol. 10(1), pages 321-335, June.
    14. Yukichi Mano & Kazushi Takahashi & Keijiro Otsuka, 2020. "Mechanization in land preparation and agricultural intensification: The case of rice farming in the Cote d'Ivoire," Agricultural Economics, International Association of Agricultural Economists, vol. 51(6), pages 899-908, November.
    15. Ogutu, Sylvester Ochieng & Ochieng, Dennis O. & Qaim, Matin, 2020. "Supermarket contracts and smallholder farmers: Implications for income and multidimensional poverty," Food Policy, Elsevier, vol. 95(C).
    16. Ruml, Anette & Qaim, Matin, 2020. "Effects of marketing contracts and resource-providing contracts in the African small farm sector: Insights from oil palm production in Ghana," World Development, Elsevier, vol. 136(C).
    17. 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.
    18. Bellemare, Marc F. & Bloem, Jeffrey R., 2018. "Does contract farming improve welfare? A review," World Development, Elsevier, vol. 112(C), pages 259-271.
    19. Kedar, Vishnu Shankarrao & Kumar, Parmod & Neharkar, Pratibha, 2020. "Do transaction costs prevent smallholder’s participation in Supermarket? Empirical Evidences from India," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304504, Agricultural and Applied Economics Association.
    20. Paudel, G. & Krishna, V. & McDonald, A., 2018. "Why some inferior technologies succeed? Examining the diffusion and impacts of rotavator tillage in Nepal Terai," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277149, International Association of Agricultural Economists.
    21. Mishra, Ashok K. & Kumar, Anjani & Joshi, Pramod K. & D'Souza, Alwin & Tripathi, Gaurav, 2018. "How can organic rice be a boon to smallholders? Evidence from contract farming in India," Food Policy, Elsevier, vol. 75(C), pages 147-157.
    22. Soullier, Guillaume & Moustier, Paule, 2018. "Impacts of contract farming in domestic grain chains on farmer income and food insecurity. Contrasted evidence from Senegal," Food Policy, Elsevier, vol. 79(C), pages 179-198.
    23. repec:oup:apecpp:v:40:y:2018:i:3:p:353-378. is not listed on IDEAS

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ashok K. Mishra & Anjani Kumar & Pramod K. Joshi & Alwin D'Souza, 2018. "Cooperatives, contract farming, and farm size: The case of tomato producers in Nepal," Agribusiness, John Wiley & Sons, Ltd., vol. 34(4), pages 865-886, October.
    2. Paudel, G. & Krishna, V. & McDonald, A., 2018. "Why some inferior technologies succeed? Examining the diffusion and impacts of rotavator tillage in Nepal Terai," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277149, International Association of Agricultural Economists.
    3. Maertens, Miet & Vande Velde, Katrien, 2017. "Contract-farming in Staple Food Chains: The Case of Rice in Benin," World Development, Elsevier, vol. 95(C), pages 73-87.
    4. Kassie, Menale & Shiferaw, Bekele & Muricho, Geoffrey, 2011. "Agricultural Technology, Crop Income, and Poverty Alleviation in Uganda," World Development, Elsevier, vol. 39(10), pages 1784-1795.
    5. Wendimu, Mengistu Assefa & Henningsen, Arne & Gibbon, Peter, 2016. "Sugarcane Outgrowers in Ethiopia: “Forced” to Remain Poor?," World Development, Elsevier, vol. 83(C), pages 84-97.
    6. Bellemare, Marc F. & Bloem, Jeffrey R., 2018. "Does contract farming improve welfare? A review," World Development, Elsevier, vol. 112(C), pages 259-271.
    7. Ito, Junichi & Bao, Zongshun & Su, Qun, 2012. "Distributional effects of agricultural cooperatives in China: Exclusion of smallholders and potential gains on participation," Food Policy, Elsevier, vol. 37(6), pages 700-709.
    8. Dettmann, E. & Becker, C. & Schmeißer, C., 2011. "Distance functions for matching in small samples," Computational Statistics & Data Analysis, Elsevier, vol. 55(5), pages 1942-1960, May.
    9. Soullier, Guillaume & Moustier, Paule, 2018. "Impacts of contract farming in domestic grain chains on farmer income and food insecurity. Contrasted evidence from Senegal," Food Policy, Elsevier, vol. 79(C), pages 179-198.
    10. Liane Faltermeier & Awudu Abdulai, 2009. "The impact of water conservation and intensification technologies: empirical evidence for rice farmers in Ghana," Agricultural Economics, International Association of Agricultural Economists, vol. 40(3), pages 365-379, May.
    11. Ragasa, Catherine & Lambrecht, Isabel & Kufoalor, Doreen S., 2018. "Limitations of Contract Farming as a Pro-poor Strategy: The Case of Maize Outgrower Schemes in Upper West Ghana," World Development, Elsevier, vol. 102(C), pages 30-56.
    12. 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.
    13. Uematsu, Hiroki & Mishra, Ashok K., 2012. "Organic farmers or conventional farmers: Where's the money?," Ecological Economics, Elsevier, vol. 78(C), pages 55-62.
    14. Bola Awotide & Arega Alene & Tahirou Abdoulaye & Victor Manyong, 2015. "Impact of agricultural technology adoption on asset ownership: the case of improved cassava varieties in Nigeria," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 7(6), pages 1239-1258, December.
    15. Girma, Jony & Gardebroek, Cornelis, 2015. "The impact of contracts on organic honey producers' incomes in southwestern Ethiopia," Forest Policy and Economics, Elsevier, vol. 50(C), pages 259-268.
    16. Caliendo, Marco & Mahlstedt, Robert & Mitnik, Oscar A., 2017. "Unobservable, but unimportant? The relevance of usually unobserved variables for the evaluation of labor market policies," Labour Economics, Elsevier, vol. 46(C), pages 14-25.
    17. Veettil, P. Chellattan & Yashodha, Y. & Johny, J., 2018. "Group contracts and sustainability - Experimental evidence from smallholder rice seed production," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277563, International Association of Agricultural Economists.
    18. Johny, J. & Veettil, P.C. & Yashodha, Y., 2018. "Group contracts and sustainability - Experimental evidences from smallholder rice seed production," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 276042, International Association of Agricultural Economists.
    19. Jones A.M & Rice N, 2009. "Econometric Evaluation of Health Policies," Health, Econometrics and Data Group (HEDG) Working Papers 09/09, HEDG, c/o Department of Economics, University of York.
    20. Ayala, Luis & Rodríguez, Magdalena, 2013. "Health-related effects of welfare-to-work policies," Social Science & Medicine, Elsevier, vol. 93(C), pages 103-112.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jfpoli:v:62:y:2016:i:c:p:110-121. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.elsevier.com/locate/foodpol .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/foodpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.