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The Effects of Contract Farming on Efficiency and Productivity of Small-Scare Sunflower Farmers in Tanzania

Listed author(s):
  • Henningsen, Arne
  • Mpeta, Daniel F.
  • Adem, Anwar S.
  • Kuzilwa, Joseph A.
  • Czekaj, Tomasz G.

Due to changes in the global agricultural system and support from various organizations, contract farming has recently been significantly expanded in many developing countries. A considerable body of literature analyses the impact of contract farming on the welfare of smallholders, whereas its impact on efficiency and productivity is mostly overlooked. This study addresses this salient gap by combining the approaches of Bravo-Ureta, Greene, and Solís (Empirical Economics, 2012) and Rao, Brümmer, and Qaim (AJAE, 2012). We first estimate separate production frontiers for contract farmers and non-contract farmers that account for potential selection biases, and second, we create a meta-frontier. Using cross-sectional data from sunflower farmers in Tanzania, we find a significant selection bias. Contract farming significantly increases the yield potential but lowers the average group technical efficiency. As the first effect is slightly larger than the second, we find a small positive effect of contract farming on productivity.

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File URL: http://purl.umn.edu/212478
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Paper provided by International Association of Agricultural Economists in its series 2015 Conference, August 9-14, 2015, Milan, Italy with number 212478.

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Date of creation: 2015
Handle: RePEc:ags:iaae15:212478
Contact details of provider: Web page: http://www.iaae-agecon.org/
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  1. William Greene, 2010. "A stochastic frontier model with correction for sample selection," Journal of Productivity Analysis, Springer, vol. 34(1), pages 15-24, August.
  2. Forsund, Finn R. & Lovell, C. A. Knox & Schmidt, Peter, 1980. "A survey of frontier production functions and of their relationship to efficiency measurement," Journal of Econometrics, Elsevier, vol. 13(1), pages 5-25, May.
  3. Bravo-Ureta, Boris E. & Evenson, Robert E., 1994. "Efficiency in agricultural production: the case of peasant farmers in eastern Paraguay," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 10(1), January.
  4. Birthal, Pratap S. & Jha, Awadhesh K. & Tiongco, Marites & Narrod, Clare, 2008. "Improving farm-to-market linkages through contract farming: A case study of smallholder dairying in India," IFPRI discussion papers 814, International Food Policy Research Institute (IFPRI).
  5. Boris Bravo-Ureta & William Greene & Daniel Solís, 2012. "Technical efficiency analysis correcting for biases from observed and unobserved variables: an application to a natural resource management project," Empirical Economics, Springer, vol. 43(1), pages 55-72, August.
  6. Hongdong Guo & Robert W Jolly & Jianhua Zhu, 2007. "Contract Farming in China: Perspectives of Farm Households and Agribusiness Firms," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 49(2), pages 285-312, June.
  7. Barrett, Christopher B. & Bachke, Maren E. & Bellemare, Marc F. & Michelson, Hope C. & Narayanan, Sudha & Walker, Thomas F., 2012. "Smallholder Participation in Contract Farming: Comparative Evidence from Five Countries," World Development, Elsevier, vol. 40(4), pages 715-730.
  8. Bharat Ramaswami & Pratap Singh Birthal & P.K. Joshi, 2005. "Efficiency and distribution in contract farming:The case of Indian poultry growers," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 05-01, Indian Statistical Institute, New Delhi, India.
  9. Porter, Gina & Phillips-Howard[malt], Kevin, 1997. "Comparing contracts: An evaluation of contract farming schemes in Africa," World Development, Elsevier, vol. 25(2), pages 227-238, February.
  10. Miyata, Sachiko & Minot, Nicholas & Hu, Dinghuan, 2009. "Impact of Contract Farming on Income: Linking Small Farmers, Packers, and Supermarkets in China," World Development, Elsevier, vol. 37(11), pages 1781-1790, November.
  11. Singh, Sukhpal, 2002. "Contracting Out Solutions: Political Economy of Contract Farming in the Indian Punjab," World Development, Elsevier, vol. 30(9), pages 1621-1638, September.
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  13. George Battese & D. Rao & Christopher O'Donnell, 2004. "A Metafrontier Production Function for Estimation of Technical Efficiencies and Technology Gaps for Firms Operating Under Different Technologies," Journal of Productivity Analysis, Springer, vol. 21(1), pages 91-103, January.
  14. Warning, Matthew & Key, Nigel, 2002. "The Social Performance and Distributional Consequences of Contract Farming: An Equilibrium Analysis of the Arachide de Bouche Program in Senegal," World Development, Elsevier, vol. 30(2), pages 255-263, February.
  15. Ismat Ara Begum & Mohammad Jahangir Alam & Jeroen Buysse & Aymen Frija & Guido Van Huylenbroeck, 2012. "Contract farmer and poultry farm efficiency in Bangladesh: a data envelopment analysis," Applied Economics, Taylor & Francis Journals, vol. 44(28), pages 3737-3747, October.
  16. repec:zwi:journl:v:43:y:2012:i:1:p:55-72 is not listed on IDEAS
  17. Marco Caliendo & Sabine Kopeinig, 2008. "Some Practical Guidance For The Implementation Of Propensity Score Matching," Journal of Economic Surveys, Wiley Blackwell, vol. 22(1), pages 31-72, 02.
  18. Ho, Daniel & Imai, Kosuke & King, Gary & Stuart, Elizabeth A., 2011. "MatchIt: Nonparametric Preprocessing for Parametric Causal Inference," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 42(i08).
  19. Christopher O’Donnell & D. Rao & George Battese, 2008. "Metafrontier frameworks for the study of firm-level efficiencies and technology ratios," Empirical Economics, Springer, vol. 34(2), pages 231-255, March.
  20. Alexis Diamond & Jasjeet S. Sekhon, 2013. "Genetic Matching for Estimating Causal Effects: A General Multivariate Matching Method for Achieving Balance in Observational Studies," The Review of Economics and Statistics, MIT Press, vol. 95(3), pages 932-945, July.
  21. Sekhon, Jasjeet S., 2011. "Multivariate and Propensity Score Matching Software with Automated Balance Optimization: The Matching package for R," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 42(i07).
  22. Carr, S.J., 1993. "Improving Cash Crops in Africa; Factors Influencing the Productivity of Cotton, Coffee and Tea Grown by Smallholders," Papers 216, World Bank - Technical Papers.
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