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Estimating Technical Efficiency and Production Risk under Contract Farming: A Bayesian Estimation and Stochastic Dominance Methodology
Author(s) -
Mishra Ashok K.,
Rezitis Anthony N.,
Tsionas Mike G.
Publication year - 2019
Publication title -
journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.157
H-Index - 61
eISSN - 1477-9552
pISSN - 0021-857X
DOI - 10.1111/1477-9552.12291
Subject(s) - stochastic dominance , inefficiency , contract farming , production (economics) , economics , dominance (genetics) , econometrics , quantile regression , order (exchange) , agriculture , commodity , microeconomics , agricultural science , agricultural economics , market economy , ecology , biochemistry , chemistry , environmental science , finance , biology , gene
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.