Does Contract Farming Enhance Income of Farmers? Evidence in Tea Production of Vietnam

Abstract

Purpose: The theme of effects of contract farming on income of farmers has been strongly debated by scholars in recent years, especially in developing countries. This article attempts to investigate the influence of contract farming on the income of farmers in tea production in Phu Tho province of Vietnam. Research Method: Primary data for the study is gathered by a cross-sectional survey on 358 tea farmers in five districts of Phu Tho province between March and June 2016. Propensity score matching is employed to assess effects of contract participation on income of tea farmers in Phu Tho province, Vietnam. Findings: Our results suggest that contract farming can have a minor positive impact on farmers’ incomes. The average income of contracted farmers is found to be higher than that of their counterparts by about US$720 per year. Due to this small difference of income, contract farming plays an important role in procuring leaf tea, stabilising prices of leaf tea and generating employment rather than enhancing income for tea farmers. Originality/value: The research contributes to the empirical work by providing an evidence on influences of contract farming on income of tea farmers as well as re-examining the importance of contract farming to improving livelihood of tea farmers in Phu Tho province, Vietnam.