Does Contract Length Matter? The Impact of Various Contract-Farming Regimes on Land-Improvement Investment and the Efficiency of Contract Farmers in Pakistan

Rabia Mazhar, Hossein Azadi, Steven Van Passel, Rando Värnik, Marcin Pietrzykowski, Rytis Skominas, Zou Wei () and Bi Xuehao
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Rabia Mazhar: College of Public Administration, Nanjing Agricultural University, Nanjing 210095, China
Hossein Azadi: Department of Economic and Rural Development, Gembloux Agro-Bio Tech, University of Liège, 4000 Liege, Belgium
Steven Van Passel: Department of Engineering Management, University of Antwerp, Prinsstraat 13, 2000 Antwerp, Belgium
Rando Värnik: Institute of Agricultural and Environmental Sciences, Rural Economics, Estonian University of Life Sciences, 51014 Tartu, Estonia
Marcin Pietrzykowski: Department of Ecological Engineering and Forest Hydrology, Faculty of Forestry, University of Agriculture in Krakow, al. 29 Listopada 46, 31-425 Krakow, Poland
Rytis Skominas: Institute of Hydraulic Engineering, Vytautas Magnus University Agriculture Academy, 53361 Kaunas, Lithuania
Zou Wei: College of Public Administration, Nanjing Agricultural University, Nanjing 210095, China
Bi Xuehao: College of Public Administration, Nanjing Agricultural University, Nanjing 210095, China

Agriculture, 2023, vol. 13, issue 9, 1-16

Abstract: Land-tenure security is integral to local communities’ socioeconomic development. It has been a center of debate in academia and for legislators and advocates to implement reforms to enhance efficient and sustainable development in land management. Yet, knowledge gaps remain in how various contract-farming regimes contribute to land-improvement investment and technical efficiency. This study used a data set of 650 farm households collected through a two-stage stratified sampling to investigate the influence of three contract-farming regimes: long-term, medium-term, and short-term contracts, on the land-improvement investment, productivity, and technical efficiency of contract farmers in Punjab, Pakistan. The study used multivariate probit and ordinary least square regression models to examine the posit relationships. The findings highlight that farmers with long-term land contracts have higher per hectare yield, income and profit than those with medium-term and short-term contracts. The results confirm that farmers with medium- and long-term contracts tend to invest more in land-improvement measures, i.e., organic and green manure. Further, the study findings demonstrate that long-term land tenures are more effective when farmers make decisions regarding the on-farm infrastructure, like tube-well installation, tractor ownership, and holding farm logistics. Last, the study results confirm that long-term contracts are more robust regarding technical efficiency. Moreover, the findings support the Marshallian inefficiency hypothesis and extend the literature on contract farming, land-improvement investment, and land use policy, and offer coherent policy actions for stakeholders to improve farmers’ productivity, technical efficiency, and income.

Keywords: contract-farming regimes; land-improvement investment; land-use policy; productivity; technical efficiency; organic farming (search for similar items in EconPapers)
JEL-codes: Q1 Q10 Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 (search for similar items in EconPapers)
Date: 2023
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