We find no tangible evidence that contract farming produces ripple effects on non-participatory farm households in the same municipalities. This is a bit surprising, as our results indicate that contract farming is increasing the demand for temporary work. Such labour market effects can be expected to result in higher incomes in non-participatory households. A better understanding of local and sectoral impact is important from a policy perspective, but it is currently very difficult due to limited data. For example, the data used here do not sufficiently cover non-agricultural households. Similarly, we lack information about who in the villages is actually employed (or influenced by other) contract builders. In the future, researchers and donors may wish to design surveys that better identify possible ripple and network effects to allow for more detailed analyses. Overall, data on the impact of contract farming on participating and non-participating households are mainly based on case studies. Most of these studies are based on cross-sectional observational data from a field of case studies, which often cover a single contractual scheme or a small geographical area (with the exception of references 15, 32 and 33). These study designs provide results that are not representative beyond a given contractual scheme or region. In this context, existing studies focus mainly on large export-oriented contractual systems, managed by private companies. More informal, public or national systems are poorly covered and are therefore poorly presented in the literature.

This is a serious shortcoming, as such rules can involve and affect more farmers than large export-oriented regulations. Our data and definition of the contractual economy cover a wide range of contractual agreements – which may work well and badly – that include different products, buyers, pricing policies, formality levels and associated services. One might be tempted to argue that large formal contractual rules providing inputs and other services (past results) generate much greater income gains for farmers than one might expect on average (our results). Examining whether this is the case would be beyond the scope of this document, as we do not have detailed information on the characteristics of the Treaty. But intuition suggests this – and robustness tests seem to support the following: more formal contracts with larger buyers can be as beneficial to participating farmers as more informal pre-harvest agreements with smaller buyers. Contract farming – an agreement between farmers and buyers before harvest – is generally seen as a useful instrument to mitigate the prevailing market failure and reduce risks for small farmers (6.4.8). Contract farming is therefore encouraged by policy makers and development agencies (9, 10). Conventional agriculture is not a new phenomenon (8, 11); However, the globalization of agricultural trade and the rapid modernization of agricultural value chains in developing countries (5) have generated renewed interest in the issue. Sample designs with non-random samples (e.g.B. Choice-based elements are a common feature of case studies and are nevertheless a valid and important tool for providing knowledge on topics that have not been understood so far. Nevertheless, the literature on contract farming has steadily grown over the past 3 decades (6, 18/20) and case studies, especially when it comes to ineligible samples, are less likely to test existing hypotheses. To understand why, we need to think about how research teams choose areas of case study.

We define contract farmers as farmers who have a contract to sell their crop or animal products. Similarly, we define budgets as contractual budgets when at least 1 member of the budget has a contract. Therefore, our definition of contract farming covers a wide range of contractual agreements that include different products, buyers, pricing policies, levels of formality and related services. . . .