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 agricultural value chains on the welfare of smallholders? Contract farming, wherein a processing firm delegates its production of agricultural commodities to growers, is often viewed as a means of increasing smallholder welfare in developing countries. Because the problem posed by the nonrandom participation of grower smallholders in contract farming has so far not been dealt with convincingly, however, whether participation in contract farming actually increases smallholder welfare is still up for debate. This paper uses an experimentally derived nonparametric measure of willingness to pay to enter contract farming to control for actual participation in contract farming. Using data from Madagascar, results indicate that participation in contract farming is associated with a 10- to 16-percent increase in income; a 15-percent decrease in income volatility; a two-month decrease in the duration of the hungry season; and a 31-percent increase in the likelihood of receiving 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
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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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:27259

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