Interlinked Transactions in Cash Cropping Economies: The Determinants of Farmer Participation and Performance in the Zambezi River Valley of Mozambique

16 Pages Posted: 6 Jan 2019

See all articles by Rui S Benfica

Rui S Benfica

International Fund for Agricultural Development (IFAD)

David Tschirley

Michigan State University - Department of Agricultural Economics

Duncan Boughton

Michigan State University - Department of Agricultural, Food and Resource Economics

Date Written: August 12, 2006

Abstract

This paper investigates the determinants of participation and performance of tobacco contract farmers, and the effects of participation on overall crop and household incomes in the Zambezi Valley of Mozambique. We test the existence of threshold effects in land holdings and educational attainment to identify the types of farmers that benefit. Several results stand out. First, participation in the schemes is driven by factor endowments, asset ownership and alternative income opportunities, and very little by demographic factors. Second, we find no returns to education in tobacco; this result is consistent with previous research in Mozambique but surprising in an agronomically demanding crop like tobacco. Third, there appear to be economies of scale in tobacco production, perhaps through more efficient use of hired labor. If true, tobacco could drive greater economic differentiation through the growth of “emergent” or commercial smallholder households – something that has been conspicuously lacking in Mozambique to date. Fourth, farmers without wage income are more likely to grow tobacco; since other research shows that wage labor has driven most income growth in Mozambique over the past six years, tobacco could be inequality reducing. Tobacco growers also hire much more labor than non-growers, contributing to second-round inequality reducing effects. Further analysis, preferably in a general equilibrium framework, is needed to understand how the simultaneous forces of economic differentiation and spreading of economic benefits will affect income distribution. Potential adverse environmental impacts also deserve far more attention than they have received to date.

Keywords: Contract Farming, Selection Bias, Treatment Effects, Threshold

JEL Classification: C21, D1, L1, J43, Q12

Suggested Citation

Benfica, Rui S and Tschirley, David and Boughton, Duncan, Interlinked Transactions in Cash Cropping Economies: The Determinants of Farmer Participation and Performance in the Zambezi River Valley of Mozambique (August 12, 2006). Available at SSRN: https://ssrn.com/abstract=3305078 or http://dx.doi.org/10.2139/ssrn.3305078

Rui S Benfica (Contact Author)

International Fund for Agricultural Development (IFAD) ( email )

Via Paolo di Dono
Rome, 00142
Italy

David Tschirley

Michigan State University - Department of Agricultural Economics ( email )

East Lansing, MI 48824
United States

Duncan Boughton

Michigan State University - Department of Agricultural, Food and Resource Economics ( email )

MI
United States

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