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Market structure, outgrower contracts, and farm output. Evidence from cotton reforms in Zambia

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  • Irene Brambilla
  • Guido G. Porto

Abstract

This paper investigates the dynamic impacts of cotton marketing reforms on farm output in rural Zambia. Following liberalization and the elimination of the Zambian cotton marketing board, the sector developed an outgrower scheme whereby cotton firms provided credit, access to inputs and output markets, and technical assistance to the farmers. There are two distinctive phases of the reforms: a failure of the outgrower contracts, due to farmers' debt renegation, firm hold up, and lack of coordination among firms and farms, and a subsequent period of success of the scheme, due to enhanced contract enforcement and commitment. We find interesting dynamics in the sector. During the phase of failure, farmers were pushed back into subsistence and cotton yields per hectare declined. With the improvement of the outgrower scheme, farmers devoted larger shares of land to cash crops, and farm output significantly increased. Copyright 2011 Oxford University Press 2011 All rights reserved, Oxford University Press.

Suggested Citation

  • Irene Brambilla & Guido G. Porto, 2011. "Market structure, outgrower contracts, and farm output. Evidence from cotton reforms in Zambia," Oxford Economic Papers, Oxford University Press, vol. 63(4), pages 740-766, December.
    • Handle: RePEc:oup:oxecpp:v:63:y:2011:i:4:p:740-766
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    File URL: http://hdl.handle.net/10.1093/oep/gpr004
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    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • 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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