Last updated on February 2, 2014
An article in the latest issue of Food Policy by my grad-school colleague and coauthor Sudha Narayanan explores the heterogeneity in welfare gains from participating in high-value agriculture for South Indian smallholder farmers:
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.
After looking at correlations between participation in contract farming and welfare in the late 1990s and early to mid-2000s, the literature began focusing on both internal validity (by using more sophisticated means of teasing out causal relationships from correlations) and external validity (by looking at more than one commodity) in the late 2000s and early 2010s. It’s nice to see the literature delve a bit deeper now by looking at the heterogeneity in treatment effects.
This is also the only study I know of where a negative welfare effect is reported (for marigold farming). Such findings are presumably rare because contracts in which growers lose out tend to not last more than one or two seasons.