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Does contract farming improve welfare? A review

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  • Bellemare, Marc F.
  • Bloem, Jeffrey R.

Abstract

Although many urban areas around the world have grown steadily in recent years, the structural transformation, wherein an economy goes from relying primarily on agriculture and natural resources to relying primarily on manufacturing, has eluded many developing countries. In those countries, contract farming, whereby processors contract out the production of some agricultural commodity to growers, is often seen as a means of spurring the development of an agribusiness sector, and thus launch the structural transformation. As a result, economists and other social scientists have extensively researched contract farming over the last 30 years. We review the findings of the economics literature on contract farming and discuss its implications for development policy and research. In so doing, we highlight the methodological weaknesses that limit much of the literature on contract farming in answering questions of relevance for policy. Despite valiant research effort, many of the core features of contract farming imply substantial challenges for researchers aiming to study the question “Does contract farming improve welfare?” We conclude with a discussion of where we see the literature on contract farming evolving over the next few decades.

Suggested Citation

  • Bellemare, Marc F. & Bloem, Jeffrey R., 2018. "Does contract farming improve welfare? A review," World Development, Elsevier, vol. 112(C), pages 259-271.
  • Handle: RePEc:eee:wdevel:v:112:y:2018:i:c:p:259-271
    DOI: 10.1016/j.worlddev.2018.08.018
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    3. Rob Kuijpers, 2019. "Value Chain Development as Public Policy: Conceptualization and Evidence from the Agri-Food Sector in Bangladesh," LICOS Discussion Papers 41419, LICOS - Centre for Institutions and Economic Performance, KU Leuven.

    More about this item

    Keywords

    Contract farming; Outgrower schemes; Agricultural value chains; Agribusiness; Africa; Asia; Latin America;

    JEL classification:

    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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