Rice Contract Farming in Lao PDR: Moving from Subsistence to Commercial Agriculture
Setboonsarng, Sununtar; Leung, PingSun; Stefan, Adam | February 2008
Abstract
Poverty is prevalent among small farms in transition economies such as the Lao PDR, where market failures prevail and subsistence production is the norm. Contract farming is emerging as a promising tool to facilitate market linkages and provide the necessary supports that enable small farms to transition to commercial production. Using data from a household survey of 332 contract farmers and 253 non-contract farmers, this study attempts to empirically assess the potential of contract farming as a development tool to increase small farm incomes and reduce rural poverty. Using propensity score matching methodology and an endogenous switching regression model to assess the profitability of contract and non-contract rice farms in the Lao PDR, we found that contract farmers earn significantly higher profits than non-contract farmers. The results also show that contract farming tends to provide the greatest increase in income to farmers with below-average performance. These findings suggest that contract farming can be an effective private-sector-led mechanism to facilitate the transition to commercial agriculture. In addition to bringing foreign direct investment (FDI) into the rural sector, contract farming can be an effective tool to improve the profitability and raise the incomes of small farmers, thereby reducing poverty in rural areas with limited market development.
Citation
Setboonsarng, Sununtar; Leung, PingSun; Stefan, Adam. 2008. Rice Contract Farming in Lao PDR: Moving from Subsistence to Commercial Agriculture. © Asian Development Bank. http://hdl.handle.net/11540/3678. License: CC BY 3.0 IGO.Keywords
Commercial agriculture
Agriculture
Sustainable agriculture
Trade Volume
Agricultural Trade
Food Security And Trade
Regional Trade Agreements
Agroindustry
Agricultural trade
Commercial farming
Agroindustry
Sustainable development
Export volume
Export Development
Access to markets
Agricultural market
Agricultural economy
Distribution
Agricultural diversification
Agricultural resource
Farm produce
Land capability for agriculture
Food Supply
Rural land use
Technological innovations
Agricultural innovations
Farm supply industry
Natural resource
Adaptive natural resource management
Produce trade
Poor
Price Indexes
Intergrated rural development
Cost and standard of living
Population
Crop improvement
Rice farming
Crop
Food industry
Perishable goods
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http://hdl.handle.net/11540/3678Metadata
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