As You Sow, So Shall You Reap: The Welfare Impacts of Contract Farming

Marc Bellemare

MPRA Paper from University Library of Munich, Germany

Abstract: What is the impact of participation in commodity chains on producer welfare? Contract farming – wherein a processing firm delegates its production of agricultural commodities to growers – is often viewed as a means of increasing grower welfare in developing countries. Because the nonrandom participation of growers in contract farming has so far not been dealt with convincingly, whether participation in contract farming increases welfare is up for debate. This paper uses the results of a contingent valuation experiment to estimate willingness to pay to enter contract farming, which is then used to control for actual participation in contract farming. Using data from Madagascar, results indicate that contract farming entails a 12- to 18-percent increase in income; a 16-percent decrease in income volatility; a two-month decrease in the duration of the hungry season; and a 30-percent increase in the likelihood that a household receives a formal loan.

Keywords: Contract Farming; Welfare; Grower-Processor Contracts; Outgrower Schemes (search for similar items in EconPapers)
JEL-codes: L23 L24 O13 O14 Q12 (search for similar items in EconPapers)
Date: 2010-07-03
New Economics Papers: this item is included in nep-afr and nep-agr
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Related works:
Journal Article: As You Sow, So Shall You Reap: The Welfare Impacts of Contract Farming (2012)
Working Paper: As You Sow, So Shall You Reap: The Welfare Impacts of Contract Farming (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:23638

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