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