Self‐protection from weather risk using improved maize varieties or off‐farm income and the propensity for insurance

We investigate how self‐protection from the adoption of Improved Maize Varieties (IMV) and off‐farm income affects risk premiums for smallholder maize producers in Uganda. To unbundle these effects, we specify the cost of risk to explicitly capture four risk components—mean, variance, skewness, and kurtosis. Using unique plot‐level panel data for Uganda, we estimate and test moments of a flexible production function based on an expanded form of the Johnson S_U family distribution and proceed to simulate the degree of responsiveness of risk premiums and welfare estimates to marginal changes in the share of land under IMV and off‐farm income. Scenarios of joint adoption of IMV accompanied with low and high application of inorganic fertilizer, and the effect of off‐farm income when there is high and low supply of farm labor are examined. Results show that the use of IMV and off‐farm income substantially reduces risk premiums and the individual effect is much higher under low fertilizer application and high supply of farm labor, respectively. Thus implying that self‐protection is likely to reduce the propensity for index insurance especially if its design fails to consider the reduction in downside risk.     

New evidence regarding the effects of contract farming on agricultural labor use

Contractual agreements between smallholder farmers and agribusiness companies have gained in importance in many developing countries. While productivity and income effects of contracting in the small farm sector were analyzed in many previous studies, labor market and employment effects are not yet well understood. This is an important research gap, especially against the background of continued population growth and structural transformation. Here, we investigate the effects of two types of contractual agreements between large international processing companies and smallholder farmers on agricultural labor use, household labor allocation, and hired labor demand in Ghana's palm oil sector. We use cross‐sectional survey data and a willingness‐to‐pay approach to control for unobserved heterogeneity between farmers with and without contracts. We find that agricultural labor intensity is substantially reduced through the contracts, because contracting in Ghana is associated with the adoption of labor‐saving procedures and technologies. Simple marketing contracts lead to reallocation of the saved household labor to off‐farm employment, whereas resource‐providing contracts lead to a stronger reallocation of labor within the farming enterprise. Household labor is more affected by labor savings than hired labor.     

Factors determining intercropping by rubber smallholders in Sri Lanka: a logit analysis

Variables related to farmers' awareness and attitudes towards intercropping of immature rubber (Hevea brusiliensis) stands, extension contacts, education level, and experience with farming other crops are positively associated with the probability of adoption. Higher levels of off‐farm income are associated with reduced intercropping in immature rubber stands. Farmers who are sole owners of the land and engaged in full or part‐time rubber farming show lower adoption rates than other land ownership groups. Social participation, family size, experience with farming rubber, immature and mature rubber stands size, and the nature of the land (flat/sloped) do not significantly influence adoption. These conclusions were obtained from a logit model estimated by employing the results of a survey of 588 smallholder rubber farmers from five major rubber‐growing regions in Sri Lanka.     

Effect of off‐farm income on smallholder commercialization: panel evidence from rural households in Ethiopia

This article investigates how off‐farm income affects crop output market participation decisions and marketed surplus of smallholder farmers in Ethiopia. A double‐hurdle model is estimated using three waves of panel data from the Ethiopian Rural Household Survey. Unobserved heterogeneity is controlled for using a correlated random effect procedure and potential endogeneity of explanatory variables using a control function approach. The results show that off‐farm income has no significant influence on household crop output market participation. However, conditional on market participation, additional off‐farm earnings negatively affect the marketed surplus. This indicates that farmers use off‐farm earnings for consumption rather than for investment in agricultural production. Policy measures that promote rural investment may help increase returns to labor for land‐poor households participating in off‐farm work in the process of agricultural commercialization.     

Differential livelihood impacts of oil palm expansion in Indonesia

In this article, the impacts of oil palm adoption on livelihoods of smallholder farm households are analyzed. The study builds on survey data from Sumatra, Indonesia. Treatment‐effects and endogenous switching regression models suggest that smallholder households benefit from oil palm adoption on average. Part of the benefit stems from the fact that oil palm requires less labor than rubber, the main alternative crop. This allows oil palm adopters to allocate more labor to off‐farm activities and/or to expand their farmland. For households with a low land‐to‐labor ratio, rubber is typically a more lucrative crop than oil palm. Depending on various social and institutional factors, households’ access to land, labor, and capital varies, contributing to impact heterogeneity. Welfare gains associated with oil palm are more pronounced among households that have formal land titles and access to additional land to expand their farm size during the process of adoption.     

Unconventional adjustment strategies for rural households in the less developed areas in Greece

International competition in agricultural production is intensifying following the implementation of the 1993 accord of the General Agreement on Tariffs and Trade. The production of conventional farm products in surplus is being discouraged by means of indirect economic disincentives. The Common Agricultural Policy has already adjusted to unprotected national markets within the European Union and greater market orientation is being achieved mainly through price reductions. Farmers in the less developed areas in Greece, where agricultural activity is still the main source of income and employment, have been responding to policy reforms by seeking part-time employment and income in non-farm enterprises. The adoption of alternative, unconventional farm enterprises that use farm resources in an innovative and quantitatively different way does have the potential for bringing in a new source of income to farm business. For the purpose of this research three adjustment strategies were recognised. The ‘conventional’ (no change) pathway is based on traditional, region-specific products, production methods and services. The adoption of the ‘new crop’ pathway refers to the redeployment of resources into new agricultural products, whereas farms on the market integration Pathway redeploy resources into new marketing services and agricultural product processing on the farm. The new crop and the market integration pathways are identified as unconventional adjustment strategies. Results derived from multinomial logit analysis highlight the major constraints and opportunities associated with the adoption of new crops and market integration practices. Farmers who have adopted unconventional practices are influenced by factors external to the farm. such as contacts with institutions, and have a high probability of having higher debts. These farmers are likely to depend heavily on seasonal labour and rented land. The fact that market integration activities are associated with smaller farms in conjunction with off-farm work signifies the importance of establishing an integrated rural development policy approach. Public policy involvement in enhancing dissemination of information concerning unconventional enterprises is emphasised.     

Market access by smallholder farmers in Malawi: implications for technology adoption,agricultural productivity and crop income

In Malawi, maize is the major crop and food staple. Given limited off-farm employment opportunities, much-needed increases in household income for improving food security must come from gains in agricultural productivity through better technology and more profitable crops. In the past, hybrid maize and more recently, tobacco were promoted by policy for increasing smallholder income. An analysis of determinants of adoption of these two crops and related income effects is presented. Apart from factor endowment and exposure to agroecological risks, differences in the household's access to financial and commodity markets significantly influence its cropping shares and farm income.     

Nonfarm employment,agricultural intensification,and productivity change: empirical findings from Uganda

This article uses panel data from the Living Standards Measurement Study‐Integrated Surveys on Agriculture for Uganda to assess the farm‐level effects of nonfarm employment on agricultural intensification and productivity change. A sample selection model is used to account for both unobserved heterogeneity and potential simultaneity between agricultural production and nonfarm income. Results show that nonfarm employment can have differential impacts on farm technology intensity and productivity. Nonfarm income is found to have a positive impact on farm hired labor and improved seed intensity; a negative effect on on‐farm family labor use; and no significant impact on fertilizer, soil water management, and joint use of farm technologies. The econometric evidence also indicates that agricultural productivity declines as nonfarm income increases. Taken together, our findings reveal important trade‐offs between nonfarm employment and income and farm productivity growth under smallholder agriculture. The results indicated that targeted policies are required to reduce these potential trade‐offs between nonfarm employment and agricultural intensification and productivity change.     

Is late really better than never? The farmer welfare effects of pineapple adoption in Ghana

Export agriculture offers potentially high returns to smallholder farmers in developing countries, but also carries substantial market risk. In this article we examine the intertemporal welfare impact of the timing of a farmer's entry into the export pineapple market in southern Ghana. We examine whether farmers who never cultivated pineapple are better or worse off than farmers who decided to adopt pineapple earlier or later relative to their peers and experienced a significant adverse market shock several years prior to our endline survey. We use a two‐stage least squares model to estimate the causal effect of duration of pineapple farming on farmer welfare. Consistent with economic theory, we find that earlier adoption of the new crop brings greater welfare gains than does later uptake. But we find that the gains to later uptake of pineapple—just before the market shock—are small in magnitude, just 0.1 standard deviations of a comprehensive asset index, indicating that the gains to adoption may be precarious and depend on the context, in particular on the severity of prospective market shocks.     

Do Differences in the Scale of Irrigation Projects Generate Different Impacts on Poverty and Production?

This article investigates differences in household production and consumption among small‐ and large‐scale irrigators to assess whether the scale of an irrigation project increases household welfare in Mali. Much of the evidence of the impact of irrigation does not use counterfactual analysis to estimate such impact or distinguish between the scale of the irrigation projects to be evaluated. In the dataset collected by the author, both a large‐scale irrigation project and small‐scale projects are used to construct counterfactual groups. Propensity score matching is used to estimate the average treatment effect on the treated for small and large irrigators relative to non‐irrigators on agricultural production, agricultural income and consumption per capita. Small‐scale irrigation has a larger effect on agricultural production and agricultural income than large‐scale irrigation, but large‐scale irrigation has a larger effect on consumption per capita. This suggests that market integration and non‐farm externalities are important in realising gains in agricultural surplus from irrigation.     

Dial “A” for agriculture: a review of information and communication technologies for agricultural extension in developing countries

Agriculture can serve as an important engine for economic growth in developing countries, yet yields in these countries have lagged far behind those in developed countries for decades. One potential mechanism for increasing yields is the use of improved agricultural technologies, such as fertilizers, seeds, and cropping techniques. Public sector programs have attempted to overcome information‐related barriers to technological adoption by providing agricultural extension services. While such programs have been widely criticized for their limited scale, sustainability, and impact, the rapid spread of mobile phone coverage in developing countries provides a unique opportunity to facilitate technological adoption via information and communication technology (ICT)‐based extension programs. This article outlines the potential mechanisms through which ICT could facilitate agricultural adoption and the provision of extension services in developing countries. It then reviews existing programs using ICT for agriculture, categorized by the mechanism (voice, text, internet, and mobile money transfers) and the type of services provided. Finally, we identify potential constraints to such programs in terms of design and implementation, and conclude with some recommendations for implementing field‐based research on the impact of these programs on farmers’ knowledge, technological adoption, and welfare.     

Off‐farm Employment and Input Intensification among Smallholder Maize Farmers in Kenya

We derive input demand functions for fertiliser and hybrid seed, testing for the combined and separate effects of income from non‐farm sources and agricultural wage labour among smallholder maize farmers in Kenya. More income from off‐farm sources, and specifically non‐farm sources, competes with maize intensification, particularly in more productive areas where use rates are higher. In less productive areas, where households rely more on off‐farm income and input use in maize is extremely low, agricultural wage labour reduces the likelihood that fertiliser is applied, but when used, has a positive effect on quantities purchased of both seed and fertiliser.     

Smallholder participation in vegetable exports and age‐disaggregated labor allocation in Northern Tanzania

Modern agricultural supply chains have been playing an increasingly important role in developing countries and have had significant effects on rural labor markets. This article analyses the effects of smallholder farmer participation in export vegetable supply chains in Northern Tanzania on both household hired labor demand and off‐farm labor supply, using an age‐disaggregated approach. In our sample, neither separability nor exogeneity of smallholder farmer participation in export supply chains can be rejected. Hence, we apply lognormal double‐hurdle models and find that participation in export supply chains positively affects households’ decision to hire labor from all age groups. We also find that it increases the unconditional overall level of hired labor demand, while the age‐disaggregated analysis shows that these effects mostly benefit rural youth. However, our sample does not allow us to establish statistically significant evidence of an effect on household off‐farm labor supply although the point estimates point to nonnegligible positive effect sizes.     

The Effect of the Northeast Dairy Compact on Producers and Consumers, with Implications of Compact Contagion

We model and measure the effects of the Northeast Dairy Compact on prices, quantities, and producer and consumer welfare, underscoring the distribution of these effects across regions and among producers and buyers. Using 1999 as a base year, simulations show that the Compact raised the farm price of milk in the Northeast by $0.45/cwt, lowered the farm price of milk in the rest of the country by $0.02/cwt, and transferred income from producers outside the Compact region and buyers in the Compact region to producers in the Compact region. Non-Compact producer losses exceeded Compact producer gains. Similar results are found for a scenario of Compact contagion—extension of the Compact to include additional states. In both cases, the Compact changed the distribution of the costs and benefits of price discrimination as practiced by milk marketing orders. The regional distribution of the Compact's welfare effects raises again the question of the organization and stability of the federal milk marketing order system.     

Are agro-clusters pro-poor? Evidence from Ethiopia

Governments and development agencies increasingly promote agro-clusters as a pathway to improving smallholder incomes and ensuring inclusive rural development through mitigating production and market risks. However, there is very limited empirical evidence to support this promise. We use a large farm household survey of about 4000 smallholder farmers in Ethiopia growing cereals like teff, maize, wheat, maltbarley and sesame to examine the relationship between agro-clusters and smallholder welfare and poverty. Using instrumental variable estimators, we establish a positive association between agro-clusters, household income and per capita income. Agro-clusters are also shown to reduce poverty and poverty gaps. Our results are robust over different agro-cluster proxies and alternative estimators, such as the augmented inverse probability weighting estimator. We also show that our findings are unlikely to be driven by omitted variable bias. Moving beyond average effects and in the interest of understanding heterogeneous effects, we use quantile regressions at different income levels. We find that agro-clusters are associated with welfare gains for all households. However, the most significant gains are observed for the wealthier households. Despite this regressive association, our findings suggest that agro-clusters may be useful in making farming more profitable with significant welfare implications.     

The effects of a large discrete maize price increase on the distribution of household welfare and poverty in rural Kenya1

This study estimates the effects of a large discrete maize price increase on the welfare of a sample of rural Kenyan households. The usual first‐order welfare approximation formula is extended to a second‐order formula that allows for supply and demand responses to the price change. Results show that many rural households are not affected greatly by the price change, and there are about as many gainers as losers. However, these full sample results mask important differences across regions. Welfare gains generally take place in major production areas while losses are in areas where most households are net buyers of maize. Semiparametric methods are used to investigate the relationship between income and the size of the welfare effect, and poverty dominance techniques are applied to study the impacts of the maize price increase on rural poverty.     

Smallholders,institutional services,and commercial transformation in Ethiopia

This article examines the role of institutional services of credit, input supply, and extension in the overall commercial transformation process of smallholder agriculture in Ethiopia. Survey data collected in 2006 from 309 sample households in three districts of Ethiopia are used for the analyses. Tobit regression models are used to measure the effect of access to services on the intensity of inputs use for fertilizer and agrochemicals. A probit model is used to measure these effects on the adoption of improved seeds. Intensity of use of seeds is analyzed using an ordinary least squares model. Logarithmic Cobb–Douglass functions are estimated to analyze the effect of access to services on crop productivity. Heckman's two‐stage estimation is used to examine determinants of household market participation and the extents of participation. Results show that access to institutional support services plays a significant role in enhancing smallholder productivity and market orientation. Our results imply that expanding and strengthening the institutional services is critical for the intensification and market orientation of smallholder agriculture in Ethiopia. In particular, appropriate incentives and regulatory systems are urgently needed to encourage the involvement of the private sector in the provision of agricultural services.     

Nontraditional crops,traditional constraints: The long‐term welfare impacts of export crop adoption among Guatemalan smallholders

This article documents the long‐term welfare effects of household nontraditional agricultural export (NTX) adoption. We use a panel dataset that spans the period 1985–2005, and employ difference‐in‐differences estimation to investigate the long‐term impact of nontraditional agricultural export adoption on changes in household consumption status and asset position in the Central Highlands of Guatemala. Given the heterogeneity in adoption patterns, the analysis differentiates the impact estimates based on a classification of households that takes into account the timing and duration of nontraditional agricultural export adoption. The results show that while, on average, welfare levels have improved for all households irrespective of adoption status and duration, the extent of improvement has varied across groups. Long‐term adopters exhibit the smallest increase in the lapse of two decades, in spite of some early gains. Conversely, early adopters who withdrew from nontraditional agricultural export production after reaping the benefits of the boom period of the 1980s are found to have fared better and shown greater improvements in durable asset position and housing conditions than any other category.     

Horticulture exports, agro-industrialization, and farm–nonfarm linkages with the smallholder farm sector: evidence from Senegal

In this article we address the question of farm–nonfarm linkages at the household level in Senegal. We examine whether increasing off-farm employment opportunities for rural households—resulting from increased horticulture exports and associated agro-industrialization—has benefitted the smallholder farm sector through investment linkages. We use data from a household survey in the main horticulture export region in Senegal. We find that access to unskilled employment in the export agro-industry has contributed to the alleviation of farmers' liquidity constraints, resulting in increased smallholder agricultural production.     

Oil Palm Expansion among Smallholder Farmers in Sumatra,Indonesia

Many tropical regions are experiencing a rapid growth of oil palm cultivation. In Indonesia, the world's leading palm oil producer, in addition to large companies, smallholder farmers are increasingly engaged in the oil palm sector. Smallholder oil palm cultivation may contribute to income gains and socio‐economic development. However, land‐use decisions by smallholders are not well understood. Without appropriate policies, negative social and environmental consequences can also occur. To improve the knowledge base, we use data about present and past land‐use decisions from a survey of farm households in Sumatra. Employing duration models, we analyse the determinants and dynamics of oil palm adoption among smallholders. We find that independently operating farmers are currently driving growth rates in the oil palm sector. Smallholder adoption decisions are mainly attributable to regional and village level factors. While the current adoption primarily occurs outside of contracts, previous contractual ties between companies and other farmers in the same village play an important role for individual decisions. Beyond initial adoption, we also analyse later expansion decisions. While expanding the oil palm area subsequent to initial adoption is common among all types of adopters, those without previous contracts are found to expand significantly faster. We conclude that the concessions the government has allocated to palm oil companies in the past have initiated oil palm adoption in the small farm sector, but that the ensuing land‐use dynamics are mostly beyond government control. Some wider implications are discussed.