Smallholder Farmers and Agricultural Value Chains: What Is the Policy Relevance?

A new article (ungated version here) in World Development crystallized a few of the thoughts I have been mulling over regarding contract farming and the participation of smallholders in agricultural value chains in developing countries–an area where I have done a bunch of work, and wherein I am still doing work.

First, the abstract of the article:

Considerable empirical work relates participation in contract farming with farm profitability. However causation is far from settled as few studies control for endogeneity of participation. Moreover the link between contract farming and equity is ambiguous as the association between contract farming and farmer endowments is mixed. This case study of smallholders in the tobacco industry addresses these issues, and seems to be the first such econometric application in the Philippines. Based on a treatment effects regression, contract farming increases profitability, with participation biased toward smaller farm sizes, supporting the positive role of contract farming toward inclusive growth in rural areas.

Those findings are not surprising–people would not be participating in agricultural value chains if it weren’t profitable, and small farms being more productive than larger ones, it stands to reason that companies want to work with smallholder farmers first and foremost.

Second, a few miscellaneous thoughts:

  1. Okay, so a large literature now finds that participation in agricultural value chains makes growers better off. Now what? As a matter of policy recommendation, “more contract farming” is empty and meaningless. And “setting up incentive programs to increase participation in agricultural value chains” is no better. Why would we encourage people to do something they did not want to do in the first place? In the US, we have encouraged people to do something they did not want to do in the first place (i.e., owning a house) and in 2008, it led to the worst recession this country had ever seen. Policy makers love to talk about contract farming and agricultural value chains, but it isn’t clear what they can actually do beyond talking about it, and it isn’t clear that doing anything is desirable either. Contracts are complicated because they involve more than one party. Forcing contract farming to happen would probably be as effective as forcing two people who don’t really like each other to get married.
  2. That said, sometimes it’s okay to study stuff just to know about human behavior. Not all research in the social sciences should have policy implications. In policy schools, people tend to be obsessed with “policy implications,” but social scientists often ask questions about behavior, and not everyone does impact evaluation.
  3. What is the importance of publication bias here? I mean, a paper that would show that participation in contract farming or agricultural value chains has no discernible impact on welfare (and, I suspect a paper that would show that participation has negative effects) would be unlikely to get published anywhere, and so what we end up with is a body of “knowledge” that mainly consists of evidence about the positive welfare effects of the institution. The only exception I know of is my coauthor Sudha Narayanan’s 2014 Food Policy article.

The Richard Scarry Rule of Politics and the Political Economy of Farm Subsidies

What is this “austerity” thing we keep hearing of?

A few years ago, while reporting on the madness that is European farm subsidies, this columnist came up with a “Richard Scarry” rule of politics. Most politicians hate to confront any profession or industry that routinely appears in children’s books (such as those penned by the late Mr. Scarry). This gives outsize power to such folk as farmers, fishermen, doctors, firemen or—to cite a fine work in the Scarry canon—to firms that build Cars and Trucks and Things That Go. The rule is seldom good news for taxpayers, and there is a logic to that too: picture books rarely show people handing over fistfuls of money to the government.

The Scarry rule was tested afresh on March 7th at the inaugural “Iowa Ag Summit,” a campaign-style forum for politicians pondering White House runs in 2016. Reflecting Iowa’s clout as host of the first caucuses of the presidential election cycle, the summit lured nine putative candidates, all of them Republicans. Democrats were also invited, but declined. Such grandees as Jeb Bush, a former governor of Florida, Governor Scott Walker of Wisconsin and Governor Chris Christie of New Jersey took turns to sit on a dais beside a shiny green tractor, to tell an audience of corn (maize) growers, pork-producers and hundreds of reporters how much they love farmers.

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Are the Foods You Buy at the Farmers Market Safer than Other Foods?

For the past year or so, I have been working on a paper with my colleague Rob King which I am hoping to debut sometime soon in which we look at the relationship between farmers markets and food-borne illness.

I have presented that paper twice so far–once at Ohio State, and once at Oklahoma State. Every time I present it, one thing that comes up is whether there is reverse causality, i.e., whether people perceive the foods they buy from farmers markets as safer than the foods they buy at supermarkets, which would lead to a spurious relationship between farmers markets and food-borne illness because increases in the number of outbreaks and cases of food-borne illness would then cause increases in the number of farmers markets.

After my talk at Oklahoma State, I was discussing this with Jayson Lusk, who had invited me to give that talk, and the outcome of our conversation was that we simply didn’t know what most people would think. So Jayson (whose blog you really should be reading if you don’t already) decided to include a question to that effect in his monthly Food Demand Survey (FooDS), and which he discussed in a post last week: Continue reading