Agricultural Extension and Imperfect Supervision in Contract Farming: Evidence from Madagascar

Abstract

This paper tests whether agricultural extension and imperfect supervision - conflated here into the number of visits by a technical assistant - increase productivity at the margin in a sample of contract farming arrangements between a processing firm and small agricultural producers in Madagascar. Production functions are estimated that treat the number of visits by a technical assistant as an input and that exploit the variation in the number of visits between the contracted crops grown on a given plot by a specific grower, thereby accounting for district-, grower-, and plot-level unobserved heterogeneity. Empirical results indicate that the elasticity of yield with respect to the number of visits lies between 1.3 and 1.7, depending on whether one considers the number of visits by a technical assistant with or without its interaction with the grower's education, included here to crudely tease out the effects of agricultural extension and imperfect supervision.

Keywords: Contract Farming, Grower-Processor Contracts, Agricultural Extension, Imperfect Supervision

JEL Classification: L24, O13, O14, Q12