TY - GEN

T1 - A Meta-Frontier Approach for Causal Inference in Productivity Analysis

T2 - The Effect of Contract Farming on Sunflower Productivity in Tanzania

AU - Henningsen, Arne

AU - Mpeta, Daniel F

AU - Adem, Anwar S

AU - Kuzilwa, Joseph A

AU - Czekaj, Tomasz G

N1 - Copyright 2015 by Arne Henningsen, Daniel F. Mpeta, Anwar S. Adem, Joseph A. Kuzilwa, and Tomasz G. Czekaj. All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies

PY - 2015/6

Y1 - 2015/6

N2 - Due to changes in the global agricultural system and support from various organizations,contract farming has recently been significantly expanded in many developing countries.A considerable body of literature analyses the impact of contract farming on the welfareof smallholders, whereas its impact on efficiency and productivity is mostly overlooked.This study addresses this salient gap by combining the approaches suggested by BravoUreta,Greene, and Solís (Empirical Economics 43:55–72, 2012) and Rao, Brümmer, andQaim (American Journal of Agricultural Economics 94:891–912, 2012). We first use theapproach of Bravo-Ureta, Greene and Solís (2012) to estimate two separate productionfrontiers (one for contract farmers and one for non-contract farmers) that account forpotential biases due to self-selection on both observed and unobserved variables. Then,we follow Rao, Brümmer and Qaim (2012) and create a meta-frontier in order to estimatethe effects of participation on the farms’ meta-technology ratio, their group technicalefficiency, and their meta-technology technical efficiency. The empirical analysis uses across-sectional data set from sunflower farmers in Tanzania, where some of the farmersparticipate in contract farming while others do not. We find a significant selection bias,which justifies the use of the sample selection framework. Our preliminary results indicatethat contract farming significantly increases the yield potential (meta-technology ratio)but lowers the group technical efficiency. As the first effect is slightly larger than the second,we find a small positive effect of contract farming on productivity (meta-technologytechnical efficiency). The positive effects on the yield potential and the (average) productivitycan be (at least partly) explained by the contractor’s provision of (additional)extension service and seeds of high-yielding varieties to the contract farmers.

AB - Due to changes in the global agricultural system and support from various organizations,contract farming has recently been significantly expanded in many developing countries.A considerable body of literature analyses the impact of contract farming on the welfareof smallholders, whereas its impact on efficiency and productivity is mostly overlooked.This study addresses this salient gap by combining the approaches suggested by BravoUreta,Greene, and Solís (Empirical Economics 43:55–72, 2012) and Rao, Brümmer, andQaim (American Journal of Agricultural Economics 94:891–912, 2012). We first use theapproach of Bravo-Ureta, Greene and Solís (2012) to estimate two separate productionfrontiers (one for contract farmers and one for non-contract farmers) that account forpotential biases due to self-selection on both observed and unobserved variables. Then,we follow Rao, Brümmer and Qaim (2012) and create a meta-frontier in order to estimatethe effects of participation on the farms’ meta-technology ratio, their group technicalefficiency, and their meta-technology technical efficiency. The empirical analysis uses across-sectional data set from sunflower farmers in Tanzania, where some of the farmersparticipate in contract farming while others do not. We find a significant selection bias,which justifies the use of the sample selection framework. Our preliminary results indicatethat contract farming significantly increases the yield potential (meta-technology ratio)but lowers the group technical efficiency. As the first effect is slightly larger than the second,we find a small positive effect of contract farming on productivity (meta-technologytechnical efficiency). The positive effects on the yield potential and the (average) productivitycan be (at least partly) explained by the contractor’s provision of (additional)extension service and seeds of high-yielding varieties to the contract farmers.

KW - Contract Farming

KW - Sunflower

KW - Technical efficiency

KW - Productivity

KW - Meta-Frontier

KW - Sample selection

KW - Tanzania

M3 - Conference contribution/Paper

BT - 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California

PB - Agricultural and Applied Economics Association (AAEA)

ER -