Comparison of technical efficiency and technology gaps between contracted and non-contracted vegetable farmers in Western Kenya

Abstract: Contract farming is an innovative institutional arrangement with potential
benefits to the livelihoods of value chain actors. However, there are mixed
results in the literature on the extent to which participation in contracts contributes
to farm efficiency and optimal use of available technology. This study estimated
and compared technical efficiency (TE) and technology gap ratios (TGRs) between
contracted and non-contracted farmers of chili pepper and spider plants in rural
areas of Kenya. The study used both qualitative and quantitative data from
a multistage sample of 300 vegetable farmers. The stochastic frontier and two-limit
Tobit models were applied to analyze TE and its determinants, respectively. Further,
a metafrontier method was used to estimate TGRs. Results showed that, for both
spider plant and chili, contract participants had higher mean TE with respect to the
metafrontier (0.66 and 0.24) compared to non-participants (0.12 and 0.15),
respectively. Based on the positive effect of contract farming on TE, this study
emphasizes the need for targeted interventions that reduce the bottlenecks that
hinder effective participation in contracts.

Subjects: Agriculture & Environmental Sciences; Sustainable Development; Development Policy; Rural Development; Economics andDevelopment; Economics


Joseph Alulu1*, David Jakinda Otieno1, Willis Oluoch-Kosura1 and Justus Ochieng2

*Corresponding author: Joseph Alulu,
Department of Agricultural
Economics, Faculty of Agriculture,
University of Nairobi, Kenya