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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

Contract farming is widely perceived as a means of increasing welfare in developing countries. Because of smallholder self-selection in contract farming, however, it is not clear whether contract farming actually increases grower welfare. In an effort to improve upon existing estimates of the welfare impacts of contract farming, this paper uses the results of a contingent-valuation experiment to control for unobserved heterogeneity among smallholders. Using data across several regions, firms, and crops in Madagascar, results indicate that a 1-percent increase in the likelihood of participating in contract farming is associated with a 0.5-percent increase in household income, among other positive impacts.

Suggested Citation

  • Bellemare, Marc F., 2012. "As You Sow, So Shall You Reap: The Welfare Impacts of Contract Farming," World Development, Elsevier, vol. 40(7), pages 1418-1434.
  • Handle: RePEc:eee:wdevel:v:40:y:2012:i:7:p:1418-1434
    DOI: 10.1016/j.worlddev.2011.12.008
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    More about this item

    Keywords

    contract farming; welfare; grower–processor contracts; outgrower schemes; Africa; Madagascar;
    All these keywords.

    JEL classification:

    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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