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Grower heterogeneity and the gains from contract farming: The case of Indian poultry


  • Bharat Ramaswami
  • Pratap Singh Birthal
  • P.K. Joshi


Purpose - The purpose of this paper is to offer an empirical analysis of contract farming (CF) for poultry in the southern state of Andhra Pradesh in India. Design/methodology/approach - Through a probit equation, the factors that matter to their participation in contracting are evaluated. The estimation of income gains is considered within a treatment effects model. The risk benefits from contracting are estimated by simulating the variability of returns if the contract farmers were to be independent growers. Findings - This paper shows that the poultry integrators in Andhra Pradesh are able to appropriate almost the entire efficiency gains from contracting. Yet, the contract growers are better off with the contract. This outcome is because of grower heterogeneity and the way it is employed in the selection of contract growers. The paper also finds that contract growers do gain substantially in terms of risk reduction. Research limitations/implications - The CF literature reminds us that these arrangements often fail because of opportunistic behavior. The poultry example shows that contracting is a useful institution when processor interests are closely aligned to that of the grower. This paper describes the circumstances under which this alignment is obtained. Originality/value - First, it adds to the small and growing body of work that estimates the income gains to contract growers. Second and going beyond existing work on developing countries, this paper also addresses the risk benefits from contracting. Thirdly, this paper estimates the income gains from contracting to the processing firms.

Suggested Citation

  • Bharat Ramaswami & Pratap Singh Birthal & P.K. Joshi, 2009. "Grower heterogeneity and the gains from contract farming: The case of Indian poultry," Indian Growth and Development Review, Emerald Group Publishing, vol. 2(1), pages 56-74, April.
  • Handle: RePEc:eme:igdrpp:v:2:y:2009:i:1:p:56-74

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

    Cited by:

    1. Pavneet Kaur & Naresh Singla, 2016. "Contract Farming In India: Models And Impacts," Working papers 2016-06-11, Voice of Research.
    2. Van den Broeck, Goedele & Swinnen, Johan & Maertens, Miet, 2017. "Global value chains, large-scale farming, and poverty: Long-term effects in Senegal," Food Policy, Elsevier, vol. 66(C), pages 97-107.
    3. Shivangi Chandel & Shubhro Sarkar, 2014. "Revenue non-equivalence in multidimensional procurement auctions under asymmetry," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2014-008, Indira Gandhi Institute of Development Research, Mumbai, India.
    4. John C. Beghin & Miet Maertens & Johan Swinnen, 2017. "Nontariff Measures and Standards in Trade and Global Value Chains," World Scientific Book Chapters,in: Nontariff Measures and International Trade, chapter 2, pages 13-38 World Scientific Publishing Co. Pte. Ltd..
    5. John C. Beghin & Miet Maertens & Johan Swinnen, 2017. "Nontariff Measures and Standards in Trade and Global Value Chains," World Scientific Book Chapters, in: John Christopher Beghin (ed.), Nontariff Measures and International Trade, chapter 2, pages 13-38, World Scientific Publishing Co. Pte. Ltd..
    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. Ton, Giel & Vellema, Wytse & Desiere, Sam & Weituschat, Sophia & D’Haese, Marijke, 2016. "Effectiveness of contract farming for improving income of smallholder farmers-Preliminary results of a systematic review," 149th Seminar, October 27-28, 2016, Rennes, France 244792, European Association of Agricultural Economists.
    8. Shaibu Baanni Azumah & Samuel A. Donkoh & Isaac Gershon K. Ansah, 2017. "Contract farming and the adoption of climate change coping and adaptation strategies in the northern region of Ghana," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 19(6), pages 2275-2295, December.
    9. Schwarz, Jana & Mathijs, Erik & Maertens, Miet, 2015. "Changing patterns of global agri-food trade and virtual water flows," Working Papers 200308, Katholieke Universiteit Leuven, Centre for Agricultural and Food Economics.
    10. Kozhaya, Rodrique, 2020. "A systematic review of contract farming and it's impacts on broiler producers in Lebanon," MPRA Paper 99369, University Library of Munich, Germany.
    11. Mohan, Sarah, 2020. "Risk aversion and certification: Evidence from the Nepali tea fields," World Development, Elsevier, vol. 129(C).
    12. 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.
    13. Ton, Giel & Vellema, Wytse & Desiere, Sam & Weituschat, Sophia & D'Haese, Marijke, 2018. "Contract farming for improving smallholder incomes: What can we learn from effectiveness studies?," World Development, Elsevier, vol. 104(C), pages 46-64.
    14. Annalisa Zezza & Federica Demaria & Maria Rosaria Pupo d'Andrea & Jo Swinnen & Giulia Meloni & Senne Vandevelde & Alessandro Olper & Daniele Curzi & Valentina Raimondi & Sophie Drogue, 2018. "Research for AGRI Committee - Agricultural trade: assessing reciprocity of standards," Working Papers hal-02787948, HAL.


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