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.
|Original language||English (US)|
|Number of pages||6|
|Journal||Proceedings of the National Academy of Sciences of the United States of America|
|State||Published - Jan 7 2020|
Bibliographical noteFunding Information:
ACKNOWLEDGMENTS. This research was financially supported by the German Research Foundation (DFG) (DFG Fellowship ME 5179/1-1) and by the US National Institute of Food and Agriculture (Grant MIN-14-061).
© 2020 National Academy of Sciences. All rights reserved.
- Contract farming
- External validity
- Outgrower schemes
- Smallholder farmers