Economic benefits of internet use for smallholder wheat farmers

Abstract

ABSTRACT This study analyses the economic benefits of Internet use, focusing on farm profit, risk exposure (skewness), and cost of risk. We use the flexible moment-based production function to derive the risk exposure indicator and the endogenous switching regression model to account for the self-selection bias. A quantile-based approach is also employed to estimate the influence of Internet use on the cost of risk. Analysing the household-level data surveyed from 558 wheat farmers in China, we find that Internet use significantly increases farm profit by 8% and reduces risk exposure by 102%. The profit-increasing effect of Internet use is achieved mainly because Internet use increases gross revenue and wheat yields but reduces production costs. Internet use also decreases the cost of risk associated with wheat production. Our findings highlight that Internet use could be an anti-risk strategy for smallholder farmers to boost farm performance and mitigate production risk and crop failure.