Sugarcane outgrowers in Ethiopia: "forced" to remain poor?

TY - JOUR

T1 - Sugarcane outgrowers in Ethiopia

T2 - "forced" to remain poor?

AU - Wendimu, Mengistu Assefa

AU - Henningsen, Arne

AU - Gibbon, Peter

PY - 2016

Y1 - 2016

N2 - Contract farming is often seen as a panacea for many of the challenges faced by agricultural production in developing countries. Given the large heterogeneity of contract farming arrangements, it is debatable whether all kinds of contract farming arrangements offer benefits to participating smallholders. Nonetheless, many donor agencies, nongovernmental organizations, and governments of developing countries are increasingly pushing for contract farming and outgrower schemes as an instrument to commercialize small-scale farming. Their desire for such arrangements is further reinforced by the recent rush for large-scale agricultural land acquisition in most developing countries, often described as "land grabbing," because contract farming and outgrower schemes can result in the same advantages as large-scale farming, but avoid its main drawback-namely the displacement of the current land-users. Using data from the oldest and some more recently established sugarcane outgrower schemes in Ethiopia, this paper examines the effects of compulsory participation in sugarcane outgrower production on total household income and asset stocks. Because outgrowers and non-outgrowers may have some differences prior to joining sugarcane outgrower schemes, we use genetic matching and propensity score matching to make the two groups comparable based on their observable characteristics. Our results indicate that compulsory participation in an outgrower scheme significantly reduces the income and asset stocks of outgrowers who contributed irrigated land to the outgrower scheme, while the effect is insignificant for outgrowers who contributed rain-fed land. We provide several explanations and discuss policy implications.

AB - Contract farming is often seen as a panacea for many of the challenges faced by agricultural production in developing countries. Given the large heterogeneity of contract farming arrangements, it is debatable whether all kinds of contract farming arrangements offer benefits to participating smallholders. Nonetheless, many donor agencies, nongovernmental organizations, and governments of developing countries are increasingly pushing for contract farming and outgrower schemes as an instrument to commercialize small-scale farming. Their desire for such arrangements is further reinforced by the recent rush for large-scale agricultural land acquisition in most developing countries, often described as "land grabbing," because contract farming and outgrower schemes can result in the same advantages as large-scale farming, but avoid its main drawback-namely the displacement of the current land-users. Using data from the oldest and some more recently established sugarcane outgrower schemes in Ethiopia, this paper examines the effects of compulsory participation in sugarcane outgrower production on total household income and asset stocks. Because outgrowers and non-outgrowers may have some differences prior to joining sugarcane outgrower schemes, we use genetic matching and propensity score matching to make the two groups comparable based on their observable characteristics. Our results indicate that compulsory participation in an outgrower scheme significantly reduces the income and asset stocks of outgrowers who contributed irrigated land to the outgrower scheme, while the effect is insignificant for outgrowers who contributed rain-fed land. We provide several explanations and discuss policy implications.

KW - Compulsory outgrower schemes

KW - Contract farming

KW - Ethiopia

KW - Genetic matching

KW - Propensity score matching

KW - Sugarcane

U2 - 10.1016/j.worlddev.2016.03.002

DO - 10.1016/j.worlddev.2016.03.002

M3 - Journal article

AN - SCOPUS:84962147298

SN - 0305-750X

VL - 83

SP - 84

EP - 97

JO - World Development

JF - World Development

ER -