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Marc F Bellemare - One of the best experts on this subject based on the ideXlab platform.
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Contract Farming as partial insurance
World Development, 2021Co-Authors: Marc F Bellemare, Yu Na Lee, Lindsey NovakAbstract:Abstract A core result of Contract theory is that Contracts can help transfer risk from one party to another, the latter insuring the former. We test this prediction and explore the mechanism behind it in the context of Contract Farming, the economic institution wherein a processor Contracts the production of a commodity to a grower. Specifically, we look at whether participation in Contract Farming is associated with lower levels of income variability in a sample of 1,200 households in Madagascar. Relying on a framed field experiment aimed at eliciting respondent marginal utility of participation in Contract Farming for identification in a selection-on-observables design, we find that participation in Contract Farming is associated with a 0.20-standard deviation decrease in income variability. Using mediation analysis to look at the mechanism behind this finding, we find support for the hypothesis that fixed-price Contracts—which transfer all price risk from the grower to the processor—explain the reduction in income variability associated with Contract Farming. Because the assumption that makes our selection-on-observables design possible also satisfies the conditional independence assumption, we estimate propensity score matching and doubly robust weighted regression estimators, the results of which show that our core results are robust and that participation in Contract Farming would likely be more beneficial for those households that do not participate than for those who do. Our findings thus support the notion that, in a context where formal insurance markets fail, Contracts can serve as partial insurance mechanisms.
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smallholder farmers and Contract Farming in developing countries
Proceedings of the National Academy of Sciences of the United States of America, 2020Co-Authors: Evamarie Meemken, Marc F BellemareAbstract:Poverty is prevalent in the small-farm sector of many developing countries. A large literature suggests that Contract Farming-a preharvest agreement between farmers and buyers-can facilitate smallholder market participation, improve household welfare, and promote rural development. These findings have influenced the development policy debate, but the external validity of the extant evidence is limited. Available studies typically focus on a single Contract scheme or on a small geographical area in one country. We generate evidence that is generalizable beyond a particular Contract scheme, crop, or country, using nationally representative survey data from 6 countries. We focus on the implications of Contract Farming for household income and labor demand, finding that Contract farmers obtain higher incomes than their counterparts without Contracts only in some countries. Contract farmers in most countries exhibit increased demand for hired labor, which suggests that Contract Farming stimulates employment, yet we do not find evidence of spillover effects at the community level. Our results challenge the notion that Contract Farming unambiguously improves welfare. We discuss why our results may diverge from previous findings and propose research designs that yield greater internal and external validity. Implications for policy and research are relevant beyond Contract Farming.
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does Contract Farming improve welfare a review
World Development, 2018Co-Authors: Marc F Bellemare, Jeffrey R BloemAbstract:Abstract Although many urban areas around the world have grown steadily in recent years, the structural transformation, wherein an economy goes from relying primarily on agriculture and natural resources to relying primarily on manufacturing, has eluded many developing countries. In those countries, Contract Farming, whereby processors Contract out the production of some agricultural commodity to growers, is often seen as a means of spurring the development of an agribusiness sector, and thus launch the structural transformation. As a result, economists and other social scientists have extensively researched Contract Farming over the last 30 years. We review the findings of the economics literature on Contract Farming and discuss its implications for development policy and research. In so doing, we highlight the methodological weaknesses that limit much of the literature on Contract Farming in answering questions of relevance for policy. Despite valiant research effort, many of the core features of Contract Farming imply substantial challenges for researchers aiming to study the question “Does Contract Farming improve welfare?” We conclude with a discussion of where we see the literature on Contract Farming evolving over the next few decades.
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in all shapes and colors varieties of Contract Farming
Applied Economic Perspectives and Policy, 2018Co-Authors: Marc F Bellemare, Sunghun LimAbstract:Contract Farming, wherein a processor Contracts out the production of an agricultural commodity to a grower, is the first step toward more vertically coordinated—and thus more modern—agricultural value chains. As such, in principle Contract Farming is a necessary condition for the structural transformation of developing economies to occur. Yet Contract Farming is far from monolithic, and the institution takes on a variety of forms. In this article, we describe how the institution of Contract Farming varies in cross-sectional data covering 1,200 households across six regions of Madagascar, half of which are growers in Contract Farming agreements covering a dozen different crops. In this setting, participation in Contract Farming has been associated with increases in income, improvements in food security, and reductions in income variability. Given those presumed effects in this setting of participation in Contract Farming, we then look at the correlates in our data of participation in Contract Farming. as well as one’s willingness to pay to participate in Contract Farming as a grower in an attempt to better target policies aimed at encouraging participation in Contract Farming.
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Contract Farming opportunity cost and trade offs
Agricultural Economics, 2018Co-Authors: Marc F BellemareAbstract:An important literature has established that participation in Contract Farming leads to higher incomes and has a number of other beneficial effects on the welfare of participating households. Yet no one has looked at the opportunity cost of and the various trade†offs involved in participating in Contract Farming. I look at the relationship between participation in Contract Farming and income from (i) livestock, (ii) labor markets, (iii) nonfarm businesses, and (iv) agricultural sources other than livestock and Contract Farming and (v) unearned income. Using data from Madagascar, I find that participation in Contract Farming is associated with a 79% decrease in how much income per capita the average household derives from labor markets and a 47% decrease in how much income per capita it derives from nonfarm businesses, but also with a 51% increase in how much income per capita the average household derives from agricultural sources other than livestock and Contract Farming, possibly due to technological spillovers. Thus, even though Contract Farming has been shown to improve welfare in multiple ways in this context, it looks as though those gains come at the cost of an “agricultural involution†on the part of participating households, who seem to turn away from non†agricultural activities. This has important implications for structural transformation narratives.
Katrien Vande Velde - One of the best experts on this subject based on the ideXlab platform.
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Contract Farming in staple food chains the case of rice in benin
World Development, 2017Co-Authors: Miet Maertens, Katrien Vande VeldeAbstract:Abstract In this paper, we analyze the impact of smallholder participation in a Contract-Farming scheme in the rice sector in Benin. We use data from a cross-sectional farm-household survey and different propensity score matching estimations to reveal how participation in a Contract-Farming scheme affects smallholder rice production. We find that Contract-Farming results in expansion of the rice area, intensification of rice production, increased commercialization of rice, and higher farm-gate prices, and ultimately contributes to rice output growth and increased income. Our findings imply that Contract-Farming can contribute to upgrading the rice supply chain and the development of the rice sector in Benin. Promoting and supporting the spread of Contract-Farming schemes in the sector might be an effective way to contribute to reaching the government goals of expanding rice production to become self-sufficient and improving rice quality to compete with imported rice. While there is a large empirical literature on Contract-Farming in high-value and commodity export sectors, studies on Contract-Farming in staple food sectors are very scarce. Our results document that Contract-Farming for staple food crops can be sustainable and benefit smallholder farmers; which is against theoretical expectations that Contracting for staple food crops is not feasible because of Contract-enforcement problems that stem from a low value of produce, low storage and transport costs, and a larger number of buyers in the chain. Our study contributes to understanding the role that Contract-Farming might play in the much needed upgrading of domestic and staple food crop sectors in developing countries.
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impact of Contract Farming in staple food chains the case of rice in benin
2014 International Congress August 26-29 2014 Ljubljana Slovenia, 2014Co-Authors: Katrien Vande Velde, Miet MaertensAbstract:Research on the impact of smallholder Contract-Farming largely focuses on exportoriented high-value commodities. Little is known about the possibility of Contract-Farming for upgrading in staple food chains. While theoretical insights predict Contract-Farming to be infeasible for lower-value staple food crops, empirical evidence from such sectors is extremely scarce. In this paper, we provide evidence on smallholder Contract-Farming in the rice sector in Benin. We use cross-sectional household data and propensity score matching methods to analyze the impact of Contract-Farming on selected farm performance indicators. The findings indicate that Contract-Farming has a positive impact on rice productivity and income.
Miet Maertens - One of the best experts on this subject based on the ideXlab platform.
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Contract Farming in staple food chains the case of rice in benin
World Development, 2017Co-Authors: Miet Maertens, Katrien Vande VeldeAbstract:Abstract In this paper, we analyze the impact of smallholder participation in a Contract-Farming scheme in the rice sector in Benin. We use data from a cross-sectional farm-household survey and different propensity score matching estimations to reveal how participation in a Contract-Farming scheme affects smallholder rice production. We find that Contract-Farming results in expansion of the rice area, intensification of rice production, increased commercialization of rice, and higher farm-gate prices, and ultimately contributes to rice output growth and increased income. Our findings imply that Contract-Farming can contribute to upgrading the rice supply chain and the development of the rice sector in Benin. Promoting and supporting the spread of Contract-Farming schemes in the sector might be an effective way to contribute to reaching the government goals of expanding rice production to become self-sufficient and improving rice quality to compete with imported rice. While there is a large empirical literature on Contract-Farming in high-value and commodity export sectors, studies on Contract-Farming in staple food sectors are very scarce. Our results document that Contract-Farming for staple food crops can be sustainable and benefit smallholder farmers; which is against theoretical expectations that Contracting for staple food crops is not feasible because of Contract-enforcement problems that stem from a low value of produce, low storage and transport costs, and a larger number of buyers in the chain. Our study contributes to understanding the role that Contract-Farming might play in the much needed upgrading of domestic and staple food crop sectors in developing countries.
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impact of Contract Farming in staple food chains the case of rice in benin
2014 International Congress August 26-29 2014 Ljubljana Slovenia, 2014Co-Authors: Katrien Vande Velde, Miet MaertensAbstract:Research on the impact of smallholder Contract-Farming largely focuses on exportoriented high-value commodities. Little is known about the possibility of Contract-Farming for upgrading in staple food chains. While theoretical insights predict Contract-Farming to be infeasible for lower-value staple food crops, empirical evidence from such sectors is extremely scarce. In this paper, we provide evidence on smallholder Contract-Farming in the rice sector in Benin. We use cross-sectional household data and propensity score matching methods to analyze the impact of Contract-Farming on selected farm performance indicators. The findings indicate that Contract-Farming has a positive impact on rice productivity and income.
Nicholas Minot - One of the best experts on this subject based on the ideXlab platform.
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impact of Contract Farming on income linking small farmers packers and supermarkets in china
World Development, 2009Co-Authors: Sachiko Miyata, Nicholas MinotAbstract:Summary. — This study compares Contract and non-Contract growers of apples and green onions in Shandong Province, China in order to explore the constraints on participation and the impact of Contract Farming on income. We find little evidence that firms prefer to work with larger farms, though all farms in the area are quite small. Using a Heckman selection–correction model, we find that Contract Farming raises income even after controlling for observable and unobservable household characteristics. These results suggest that Contract Farming can help raise small-farm income, though questions remain regarding the number of farmers that can be brought into such schemes. 2009 Elsevier Ltd. All rights reserved.
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impact of Contract Farming on income linking small farmers packers and supermarket in china
Research Papers in Economics, 2007Co-Authors: Sachiko Miyata, Nicholas MinotAbstract:"Contract Farming is seen by proponents as a way to raise small-farm income by delivering technology and market information to small farmers, incorporating them into remunerative new markets. Critics, however, see it as a strategy for agribusiness firms to pass production risk to farmers, taking advantage of an unequal bargaining relationship. There is also concern that Contract Farming will worsen rural income inequality by favoring larger farmers. This study examines these issues in Shandong Province, China, using survey data collected from 162 apple and green onion farmers and interviews with four Contracting firms in 2005. Using a probit model to estimate participation in a Contract-Farming scheme, we find little evidence that Contracting firms prefer to work with larger farmers, though all farms in the area are quite small. Furthermore, using a Heckman selection-correction model to control for possible selection bias, we find that Contract farmers earn significantly more than independent farmers after controlling for household labor availability, education, farm size, and other characteristics. Finally, we find that the way Contracting contributes to farm income varies between commodities: Contract apple growers benefit from higher yields (presumably due to technical assistance), while Contract green onion growers receive higher prices (presumably due to better quality). These results suggest that Contract Farming can help small farmers raise their incomes and gain access to the growing urban and export markets. Questions remain regarding the number of farmers that are, or could be, brought into similar Contract arrangements." from Authors' Abstract
Carlos Oya - One of the best experts on this subject based on the ideXlab platform.
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Contract Farming in sub saharan africa a survey of approaches debates and issues
Journal of Agrarian Change, 2012Co-Authors: Carlos OyaAbstract:The paper provides a selective survey of the most significant literature on the rise of Contract Farming in developing countries, with a focus on sub-Saharan Africa. The review of the literature illustrates ideological debates around the meaning and significance of Contract Farming and whether it is good or bad for small-scale farmers. The paper then divides the review of the literature into three key themes. First, it addresses the quantitative significance of Contract Farming in Africa, which may not be as important as it is often portrayed. Second, the paper highlights the substantial diversity of Contract Farming in Africa and problems with excessive generalizations. Third, it discusses the various drivers fuelling the spread of Contract Farming, which reflect new production conditions and existing constraints, tendencies and counter-tendencies, and both economic and political responses to changes in production and market conditions in the era of liberalization and globalization. The variety of drivers is substantial and defies generalizations about the emergence of Contract Farming. Finally, it briefly suggests research questions that tend to be absent in most of the literature on Contract Farming, and which are important in order to understand the current dynamics of agrarian change and transitions to capitalism in African countries.