Profits from participation in high value agriculture: Evidence of heterogeneous benefits in contract farming schemes in Southern India

•Examines heterogeneous welfare impacts of contract farming in four commodities.•The study uses an endogenous switching model to compute average treatment effects.•Papaya and broiler contracting imply improvements in net profit per month.•Impacts for marigold are negative and for gherkins it varies...

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Bibliographic Details
Published in:Food policy 2014-02, Vol.44, p.142-157
Main Author: Narayanan, Sudha
Format: Article
Language:English
Subjects:
Agriculture
Average treatment effects
Benefits
Commodities
Contract farming
Contraction
Contracts
Economic impact
Endogenous switching model
Estimates
Estimation
Farmers
Farming
Farmworkers
Gain
Income
India
Papayas
Participation
Profit
Profits
Surveys
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Summary:•Examines heterogeneous welfare impacts of contract farming in four commodities.•The study uses an endogenous switching model to compute average treatment effects.•Papaya and broiler contracting imply improvements in net profit per month.•Impacts for marigold are negative and for gherkins it varies depending on the firm.•Standard deviation of point estimates of treatment effects indicates high variability. This paper assesses the variable impact of participation in high value agriculture through contract farming arrangements in southern India. Using survey data for 474 farmers in four commodity sectors, gherkins, papaya marigold and broiler, an endogenous switching model is used to estimate net profits from participation. Findings suggest that average treatments effect vary widely across contract commodities. Papaya and broiler contracting offer clear net gains for participants whereas marigold contracting leaves participants worse off. For gherkins, while contracting holds net gains for participating farmers overall, this is true of contracts with some firms but not others. The standard deviations of point estimates of treatment effects are quite large indicating variability in profit gains even within the same commodity sectors. Thus, notwithstanding the sign of average treatment effects, contract farming arrangements have diverse impacts on income for individual farmers and these could have implications for sustained participation of farmers in high value agriculture.
ISSN:0306-9192
1873-5657
DOI:10.1016/j.foodpol.2013.10.010