Estimating Technical Efficiency and Production Risk under Contract Farming: A Bayesian Estimation and Stochastic Dominance Methodology

Ashok K. Mishra, Anthony N. Rezitis, Mike G. Tsionas

Research output: Contribution to journalArticle

2 Scopus citations

Abstract

We investigate production risk, technical efficiency and risk attitudes amongst contract and independent farmers. We use a Bayesian parametric approach and stochastic dominance quantile regression methods to compare technical efficiency and risk attitude of smallholders in Nepal. Using farm-level data, we find that contract farmers appear to show lower inefficiency and lower production risk. Additionally, contract and independent farmers can increase output by reducing the scale of operation. Regardless of the commodity produced and farming arrangement (contract or independent production), we find that labour, land and other inputs are risk-augmenting, while the role of capital is mixed. We find a second order stochastic dominance (SSD) for lentils, and first order stochastic dominance (FSD) for tomatoes, ginger and HYV paddy seed commodities. Finally, contract farmers are more risk averse than independent farmers, regardless of the commodity produced.

Original languageEnglish (US)
Pages (from-to)353-371
Number of pages19
JournalJournal of Agricultural Economics
Volume70
Issue number2
DOIs
StatePublished - Jun 2019

Keywords

  • Bayesian
  • Contract farming
  • production risk
  • risk attitudes
  • stochastic dominance
  • technical efficiency

ASJC Scopus subject areas

  • Agricultural and Biological Sciences (miscellaneous)
  • Economics and Econometrics

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