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Contract Farming and Rural Transformation: Evidence from a Field Experiment in Benin

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  • Aminou Arouna
  • Jeffrey D. Michler
  • Jourdain C. Lokossou

Abstract

In recent decades contract farming has emerged as a popular mechanism to encourage vertical coordination in developing country agriculture. The goal of such coordination is to better integrate smallholder farmers into the modern agricultural food system, fostering rural transformation. We use panel data from a randomized control trial to quantify the impact of different contract attributes on rural transformation and welfare of smallholder rice farmers in Benin. We vary the terms of contract, with some farmers being offered a contract that only guarantees a price, while other contracts add extension training or input loans. While all three types of contracts had positive and significant effects, we find that contracts which only included an agreement on price had nearly as large of an impact as did contracts with additional attributes. This suggests that once price uncertainty is resolved, farmers are able to address other constraints on their own.

Suggested Citation

  • Aminou Arouna & Jeffrey D. Michler & Jourdain C. Lokossou, 2019. "Contract Farming and Rural Transformation: Evidence from a Field Experiment in Benin," NBER Working Papers 25665, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:25665
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    Cited by:

    1. Macchiavello, Rocco & Miquel-Florensa, Josepa, 2019. "Buyer-Driven Upgrading in GVCs: The Sustainable Quality Program in Colombia," CEPR Discussion Papers 13935, C.E.P.R. Discussion Papers.

    More about this item

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • 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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