Does Large Farm Establishment Create Benefits for Neighboring Smallholders? Evidence from Ethiopia

Abstract

Quantifying the direction and magnitude of spillovers for small holders is an essential part of the policy dialogue surrounding large-scale agricultural investment. We use intertemporal variation in smallholders’ proximity or intensity of exposure to large farms, while exploringthe variation in large farm establishment over time and space, to analyze the presence andmagnitude of spillovers between large and small farms. Findings show that between 2004 and 2014 new formation of commercial farms did not contribute to job creation and provided at best modest benefits for neighboring smallholders in terms of technology and access to inputs. This implies that in Ethiopia a more strategic approach may be required to maximize smallholder benefits from large farm formation. Our methodology has proven to be robust and can be applied to study spillovereffects of large-scale commercial farming more generally. Avenues to do so are outlined.