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Contractual agreements between smallholder farmers and agribusiness companies have gained in importance in many developing countries. While productivity and income effects of contracting in the small farm sector were analyzed in many previous studies, labor market and employment effects are not yet well understood. This is an important research gap, especially against the background of continued population growth and structural transformation. Here, we investigate the effects of two types of contractual agreements between large international processing companies and smallholder farmers on agricultural labor use, household labor allocation, and hired labor demand in Ghana's palm oil sector. We use cross‐sectional survey data and a willingness-to-pay approach to control for unobserved heterogeneity between farmers with and without contracts. We find that agricultural labor intensity is substantially reduced through the contracts, because contracting in Ghana is associated with the adoption of labor‐saving procedures and technologies. Simple marketing contracts lead to reallocation of the saved household labor to off‐farm employment, whereas resource‐providing contracts lead to a stronger reallocation of labor within the farming enterprise. Household labor is more affected by labor savings than hired labor.

Smallholder farmers in developing countries often suffer from high risk and limited market access. Contract farming may improve the situation under certain conditions. Several studies analyzed effects of contracts on smallholder productivity and income with mixed results. Most existing studies focused on one particular contract scheme. Contract characteristics rarely differ within one scheme, so little is known about how different contract characteristics may influence the benefits for smallholders. Here, we address this research gap using data from oil palm farmers in Ghana who participate in different contract schemes. Some of the farmers have simple marketing contracts, while others have resource-providing contracts where the buyer also offers inputs and technical services on credit. A comparison group cultivates oil palm without any contract. Regression models that control for selection bias show that resource-providing contracts increase farmers' input use and yield. Resource-providing contracts also incentivize higher levels of specialization and an increase in the scale of production. These effects are especially pronounced for small and medium-sized farms. In contrast, the marketing contracts have no significant effects on input use, productivity, and scale of production. The results suggest that resource-providing contracts alleviate market access constraints, while simple marketing contracts do not in this context.

Access to credit is a key prerequisite for the development of smallholder agriculture. However, rural credit markets are typically characterized by market failures and smallholder credit access is limited. Resource-providing contracts are an institutional tool to overcome credit market failures through the provision of production inputs in the form of in-kind credit. Previous research has shown that interlinkage of contract and credit helps farmers overcome financial constraints, foster production investments, and hence increase productivities and income. However, if and how such contract schemes affect farmers' overall demand for and access to formal credit from other sources is not yet well understood. In this article, we therefore investigate the associations of the provision of in-kind credit and farming households' formal credit demand and ability to receive formal credit. We use data of 463 oil palm producers in Ghana and show that participation in contract farming is associated with an increase in credit demand. Concerning credit approval, we find that the outstanding debt of the in-kind credit scheme is associated with a substantially lower likelihood of credit acceptance. However, the results also suggest that farmers can fully compensate this negative effect by informing the bank about the contract, and thus the source of the debt. This indicates that debt acquired from resource-providing contract schemes does not necessarily pose an additional credit constraint to farmers.

Contract farming has gained in importance in many developing countries. Previous studies analysed effects of contracts on smallholder farmers' welfare, yet mostly without considering that different types of contractual relationships exist. Here, we examine associations between contract farming and farm household income in the oil palm sector of Ghana, explicitly differentiating between two types of contracts, namely simple marketing contracts and more comprehensive resource-providing contracts. Moreover, we look at different income sources to better understand how both contracts are linked to farmers' livelihood strategies. We use cross-sectional survey data and regression models. Issues of endogeneity are addressed through measuring farmers' willingness-to-participate in contracts and using this indicator as an additional covariate. Farmers with both types of contracts have significantly higher household incomes than farmers without a contract, yet with notable differences in terms of the income sources. Farmers with a marketing contract allocate more household labour to off-farm activities and thus have higher off-farm income. In contrast, farmers with a resource-providing contract have larger oil palm plantations and thus higher farm incomes. The findings suggest that the two contract types are associated with different livelihood strategies and that disaggregated analysis of different income sources is important to better understand possible underlying mechanisms.

To learn about the role of information content and source as catalysts to increase consumers' valuation of fairly traded foods, we conducted an online survey with 2,500 consumers representative of the German population. Within the online survey, respondents were randomly assigned to one of five information treatments or the control group. We employ the contingent valuation approach to measure the willingness-to-pay (WTP) premium for chocolate with the Fairtrade label compared to similar conventional chocolate. To estimate WTP and the outcome which measures the participants' purchasing intentions, we use ordinary least squares and interval regressions. We find that German consumers are willing to pay a high price premium for a Fairtrade label despite limited knowledge about the certification. This WTP is relatively robust to additional supportive information provision irrespective of the information source. However, the broader measure of behavior, the purchasing intention, can rise due to information provided by a retailer or the government. While a supportive statement by a university does not seem to incentivize the valuation of Fairtrade certified chocolate, we find that an unsupportive (zero effect) statement of the same source can discourage the purchasing intention. Our findings imply that policymakers and scientists need to mind the risk of generalized science communication and create information campaigns to increase purchasing frequency.

AbstractContract farming gained importance in many developing countries. While effects of contracting on smallholder farmers' incomes were analyzed in previous studies, diet and nutrition effects are not yet well understood. Here, we examine the effects of contract farming on dietary diversity and child anthropometrics, using survey data from the palm oil sector in Ghana. Contracting improves smallholder nutrition, but the effects vary by contract type. We distinguish between marketing contracts and resource‐providing contracts that affect household labor use and gender roles differently. For both contract types, contracting female farmers has larger positive child nutrition effects than contracting male farmers.

By successfully including smallholders, the oil palm boom in Southeast Asia has contributed significantly to rural economic development and poverty alleviation, notwithstanding its huge environmental costs. Oil palm production in other world regions is currently picking up, including in Africa. Yet it is uncertain whether the positive socioeconomic impacts from Southeast Asia can be replicated elsewhere. Little development gain may thus accompany severe environmental harm if oil palm expansion leads to deforestation. To shed light on the (prospective) role of oil palm for rural development we perform a systematic comparison of Ghana's and Indonesia's oil palm sectors at the macro and micro level, focusing on smallholder inclusion and using a mixed-methods approach. We identify substantial differences in structural conditions and policy foci that have led to two very different oil palm sectors. While the Indonesian experience clearly highlights the development opportunities coming with smallholder inclusion inagro-industrial production, our analysis shows that transferability to the West African context is limited due to regional specificities. ; Peer reviewed