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Heterogeneous effects of marketing contracts and resource-providing contracts on household income

Author

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  • Ruml, Anette
  • Ragasa, Catherine
  • Qaim, Matin

Abstract

In the existing literature, the effects of contract farming on household welfare were examined with mixed results. Most studies looked at single contract types. This paper contributes to the literature by comparing two types of contracts – simple marketing contracts and resource- providing contracts – in the Ghanaian oil palm sector. We investigate the effects of both contracts on farm income, as well as spillovers on other household income sources. We use survey data collected with an innovative sampling design and a control function approach to address possible issues of endogeneity. Both contracts lead to large positive effects on total household income in a similar magnitude, yet through quite different mechanisms. Farmers under the marketing contract use the increase in oil palm profits to transition out of agricultural production and into off-farm employment. Farmers under the resource-providing contract have a stronger dependency on income from oil palm, which is considerably more profitable under the contract. The findings underline that contract characteristics matter for the effects and that disaggregated analysis of different income sources is important to understand the underlying mechanisms.

Suggested Citation

  • Ruml, Anette & Ragasa, Catherine & Qaim, Matin, 2020. "Heterogeneous effects of marketing contracts and resource-providing contracts on household income," GlobalFood Discussion Papers 301005, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
    • Handle: RePEc:ags:gagfdp:301005
    DOI: 10.22004/ag.econ.301005
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    File URL: https://ageconsearch.umn.edu/record/301005/files/GlobalFood_DP138.pdf
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    Citations

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    Cited by:

    1. Bethelhem Legesse Debela & Anette Ruml & Matin Qaim, 2022. "Effects of contract farming on diets and nutrition in Ghana," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 44(2), pages 911-929, June.
    2. Ruml, Anette & Qaim, Matin, 2020. "Effects of marketing contracts and resource-providing contracts in the African small farm sector: Insights from oil palm production in Ghana," World Development, Elsevier, vol. 136(C).
    3. Ruml, Anette & Chrisendo, Daniel & Osabuohien, Evans & Karakara, Alhassan & Iddrisu, Abdul Malik & Lay, Jann, 2021. "Smallholders in Agro-Industrial Production: Lessons from Rural Development at New Frontiers from a Comparative Analysis of Ghana’s and Indonesia’s Oil Palm Sectors," 2021 Conference, August 17-31, 2021, Virtual 315162, International Association of Agricultural Economists.
    4. Debela, Bethelhem Legesse & Ruml, Anette & Qaim, Matin, 2021. "The Effects of Contract Farming on Diets and Nutrition in Ghana," 2021 Conference, August 17-31, 2021, Virtual 315186, International Association of Agricultural Economists.
    5. Ruml, Anette & Debela, Bethelhem Legesse & Qaim, Matin, 2021. "The effects of contract farming on diets and nutrition in Ghana," 2021 Allied Social Sciences Association (ASSA) Annual Meeting (Virtual), January 3-5, 2021, San Diego, California 307959, Agricultural and Applied Economics Association.
    6. Anette Ruml & Martin C. Parlasca, 2022. "In‐kind credit provision through contract farming and formal credit markets," Agribusiness, John Wiley & Sons, Ltd., vol. 38(2), pages 402-425, April.

    More about this item

    Keywords

    Agricultural and Food Policy; Community/Rural/Urban Development; Farm Management; Risk and Uncertainty;
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