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Supermarket contracts and smallholder farmers: Implications for income and multidimensional poverty

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  • O. Ogutu, Sylvester
  • O. Ochieng, Dennis
  • Qaim, Matin

Abstract

The food retail sector in many developing countries is transforming with a rapid growth of modern supermarkets. Supermarkets are not only influencing how food is sold to consumers, but also how agricultural products are sourced from farmers. Especially for the procurement of fresh fruits and vegetables, supermarkets often contract farmers directly to ensure consistent, high-quality supply. Previous studies analyzed the effects of supermarket contracts on smallholder farmers’ income. However, most existing studies relied on cross-section data and focused on the estimation of average income effects. Possible implications for other dimensions of household welfare were hardly examined. We add to this literature by using panel data from smallholder vegetable farmers in Kenya and econometric models with household fixed effects to estimate average and heterogeneous treatment effects of supermarket contracts on income and multidimensional poverty. On average, supermarket contracts increase per capita income in smallholder farm households by 60\%. We also find significant reductions in income poverty and multidimensional poverty. Quantile regressions show that farmers in all income groups benefit, but richer households benefit more than poorer ones in absolute terms. On the other hand, supermarket contracts cause the strongest reductions in multidimensional deprivations among the poorest households.

Suggested Citation

  • O. Ogutu, Sylvester & O. Ochieng, Dennis & Qaim, Matin, 2019. "Supermarket contracts and smallholder farmers: Implications for income and multidimensional poverty," GlobalFood Discussion Papers 291482, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
    • Handle: RePEc:ags:gagfdp:291482
    DOI: 10.22004/ag.econ.291482
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    1. Charlton, Diane & Hill, Alexandra E. & Taylor, J. Edward, "undated". "Automation and social impacts: winners and losers," ESA Working Papers 330793, Food and Agriculture Organization of the United Nations, Agricultural Development Economics Division (ESA).
    2. Benjamin Davis & Leslie Lipper & Paul Winters, "undated". "IFAD Research Series 70: Do not transform food systems on the backs of the rural poor," IFAD Research Series 320710, International Fund for Agricultural Development (IFAD).
    3. Sinne Borby Ørtenblad & Marianne Nylandsted Larsen & Thilde Bech Bruun & Daniel Ortiz-Gonzalo, 2023. "Smallholder Participation in Modernising Agri-Food Value Chains in Thailand: The Role of Traditional Markets," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 35(6), pages 1419-1439, December.
    4. Wanglin Ma & Awal Abdul‐Rahaman & Gazali Issahaku, 2023. "Welfare implications of participating in agri‐value chains among vegetable farmers in Northern Ghana," Agribusiness, John Wiley & Sons, Ltd., vol. 39(3), pages 793-811, July.
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    6. Ruoyan Zhang & Ru Chen, 2023. "The regulatory effect of cooperation degree in increasing tobacco farmers’ income by mitigating production risk shocks," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 94(4), pages 1323-1344, December.
    7. Yutong Qiu & Yunli Bai & Jiaojiao Wu & Xuanye Zeng & Linxiu Zhang, 2024. "Impact of Farmer Cooperatives on Labor Employment: Evidence from Rural China," Land, MDPI, vol. 13(12), pages 1-17, December.
    8. Arulingam, Indika & Brady, G. & Chaya, M. & Conti, M. & Kgomotso, P. K. & Korzenszky, A. & Njie, D. & Schroth, G. & Suhardiman, Diana, 2022. "Small-scale producers in sustainable agrifood systems transformation," IWMI Books, Reports H051435, International Water Management Institute.
    9. Arulingam, Indika & Brady, G. & Chaya, M. & Conti, M. & Kgomotso, P. K. & Korzenszky, A. & Njie, D. & Schroth, G. & Suhardiman, Diana, "undated". "Small-scale producers in sustainable agrifood systems transformation," IWMI Reports 329171, International Water Management Institute.
    10. Awal Abdul‐Rahaman & Gazali Issahaku & Wanglin Ma, 2023. "Agrifood system participation and production efficiency among smallholder vegetable farmers in Northern Ghana," Agribusiness, John Wiley & Sons, Ltd., vol. 39(3), pages 812-835, July.
    11. Yun-Cih Chang & Min-Fang Wei & Yir-Hueih Luh, 2021. "Choice of Modern Food Distribution Channels and Its Welfare Effects: Empirical Evidence from Taiwan," Agriculture, MDPI, vol. 11(6), pages 1-13, May.
    12. Weifan Jiang & Chengxiang Wu & Yijie Tian & Jun Xie, 2025. "Logistics mode selection of agricultural products based on fairness concerns," Operational Research, Springer, vol. 25(2), pages 1-30, June.
    13. Guo, Junping & Qu, Song, 2021. "Multidimensional and Relative Poverty in Rural China: Evidence from Micro-Level Data of 6145 Households," 2021 Conference, August 17-31, 2021, Virtual 315040, International Association of Agricultural Economists.
    14. Benjamin Davis & Leslie Lipper & Paul Winters, 2022. "Do not transform food systems on the backs of the rural poor," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 14(3), pages 729-740, June.
    15. Juan José Perfetti & José Leibovich, & Martha Delgado & Enrique López, 2024. "La tierra para uso agropecuario en Colombia: equidad y productividad," Informes de Investigación 21032, Fedesarrollo.
    16. Castro, André Bueno Rezende de, 2021. "Impact of Agricultural Market Linkages on Small-Scale Farmers’ Welfare: Evidence from Tanzania," 2021 Conference, August 17-31, 2021, Virtual 314941, International Association of Agricultural Economists.
    17. Nonkululeko Thandeka Brightness Zondi & Mjabuliseni Simon Cloapas Ngidi & Temitope Oluwaseun Ojo & Simphiwe Innocentia Hlatshwayo, 2022. "Impact of Market Participation of Indigenous Crops on Household Food Security of Smallholder Farmers of South Africa," Sustainability, MDPI, vol. 14(22), pages 1-19, November.
    18. Moroasui, Matebo Yvonne & Ampofo-Yeboah, Akwasi & Antwi, Michael Akwasi, 2023. "Evaluation of Consumer Purchasing Behaviour, Perceptions and Requirements of Aquaculture Products to Improve Growth of Sharptooth Catfish Small Businesses in Phetwane and Kaapmuiden Villages, South Af," Journal of Agribusiness and Rural Development, University of Life Sciences, Poznan, Poland, vol. 68(2).
    19. Mingyue Li & Pujie Zhao & Yu Sun, 2025. "Impacts of Green Perception Benefits and Environmental Regulation Intensity on Farmers’ Agricultural Green Production Willingness: A New Perspective of Technology Acquisition," Agriculture, MDPI, vol. 15(13), pages 1-33, June.
    20. Ochieng, Dennis O. & Ogutu, Sylvester O., 2022. "Supermarket contracts, opportunity cost and trade-offs, and farm household welfare: Panel data evidence from Kenya," World Development, Elsevier, vol. 149(C).
    21. Ming-Feng Hsieh & Yir-Hueih Luh, 2022. "Is Contract Farming with Modern Distributors Partnership for Higher Returns? Analysis of Rice Farm Households in Taiwan," Sustainability, MDPI, vol. 14(22), pages 1-16, November.

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    Keywords

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    JEL classification:

    • 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
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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