Study Of Farmers’ Outsourcing Determinants And The Impact Of Outsourcing On Household’s Technical Efficiency And Household Income

The 19th National Congress of the Communist Party of China propose to implement the strategy of rural revitalization,with a goal of "building a modern agricultural industrial system,production system,and management system,improving the agricultural supporting and protection system,developing various types of moderate scale operations,fostering new agricultural management entities,and connecting smallholder farmers and modern agricultural development with improved agricultural systems".Smallholder farmers will be the main form of China’s agricultural production and management for a long period of time.However,smallholder farmers face many challenges such as lagging information transmission,limited production scale,lack of bargaining power,and high transaction costs.By providing different types of services,smallholder farmers outsource all or partial production tasks to agricultural cooperatives,to eliminate the inherent defects of smallholder farmers participating in big markets.It is important for smallholder farmers to increase their production efficiency,market participation and income.Then,what are the outsourcing options for smallholder farmers in China’s agricultural production?What factors determine the outsourcing of farmer production?Does outsourcing really bring benefits to smallholder farmers?This study takes tobacco leaf production as an example.From the perspective of farmers,this paper empirically analyzes factors determining tobacco farmers’ choice of outsourcing and its effect on tobacco farmers’ technical efficiency and income.Firstly,I analyze the development trend of China’s tobacco leaf production and the status quo of Guizhou tobacco leaf development at the macro level,and then introduce the development of Guizhou tobacco cooperatives.Secondly,according to the attributes and characteristics of the six production of tobacco production,different outsourcing methods are subdivided.Finally,the empirical analysis is conducted based on rural household survery of tobacco farmers of Guizhou.The contents and conclusions of this study are as follows:First,using Williamson’s transaction cost theory,an analytical framework affecting production outsourcing is constructed from the perspectives of scale,uncertainty and specificity.The empirical results show that the farmers’ choice of outsourcing determined by multi-dimensional factors.After controlling the regional difference,household characteristics and family characteristics,the more flue-cured tobacco facilities the household own,the more specific it is for production use,and the tobacco farmers prefer to not outsource agricultural production.The possibility of access to disaster insurance affects the farmers’ environmental uncertainty of tobacco production and has a significant impact on its choosing outsourcing.In terms of production scale,tobacco farmers with more tobacco land are subject to labor endowment restrictions and are more inclined to outsource tobacco production.Using different outsourcing approaches,the bigger farmers are more likely to choose integrated outsourcing approach,and are more willing to choose labor-intensive outsourcing decisions.Second,using the stochastic frontier analysis model,this paper investigates the impact of outsourcing on tobacco farmer’s technical efficiency.One-step estimation method is used to reduce estimation biase.Since farmer’s outsourcing choices might be endogenous,we use instrumental variable approach.Due to the endogeneity of outsourcing decision,this paper further adopts the instrumental variable approach to construct the production outsourcing decision equation,and incorporates the estimated value of outsourcing into the stochastic frontier analysis model,which more accurately estimates the impact of outsourcing on tobacco farmers’ technical efficiency.The empirical results show that the outsourcing significantly and positively affects the technical efficiency of tobacco farmers.Different types of tobacco farmer’s outsourcing choices,including technology-intensive and labor-intensive outsourcing,have different impact on household technical efficiency.Third,this paper uses the instrumental variable method to estimate the impact of outsourcing on income.Empirical results show that production outsourcing has a significant positive effect on agricultural income of tobacco farming.The internal mechanism has two aspects.On the one hand,production outsourcing optimizes labor,technology,capital investment,which improves agricultural production efficiency,and thus increases agricultural income.On the other hand,the outsourcing of the flue-cured tobacco link effectively guarantees the tobacco quality,tobacco grading and pricing,which increases the agriculture income.In addition,different outsourcing choices have different effects on the income increase of tobacco farmers.The empirical results also show that production outsourcing also increases the possibility of family labor participation in offfarm employment,which in turn increases household offfarm income.Possible innovations of this study are listed as follows:First contribution is research perspective.This study analyzes the impact from the perspective of tobacco farmers based on the transaction cost analysis framework.Using the framework,we choose factors affecting the tobacco farmers’ outsourcing choices and the impact of outsourcing on technical efficiency and income.Secondly,on the research object,the existing literature mainly studies the production outsourcing of rice and wheat growers,and there are few studies on the outsourcing of tobacco farmers.This research takes the outsourcing of tobacco farmers as the research object,and further reveals the outsourcing regularity of tobacco production as a special agricultural product,and enriches the research object of agricultural production outsourcing.Thirdly,in addition to studying the influencing factors of tobacco production outsourcing and the impact on production efficiency,this paper further studies the impact of production outsourcing on the income of tobacco farmers,and enriches the existing literature on the impact of production outsourcing on farmers’ economics.Content.At the same time,this study has carried out a more detailed classification of tobacco production,and has also classified the types of outsourcing.Fourth,in terms of methods,this study uses the instrumental variable approach to solve the endogenous problems such as the mutual causality between the production outsourcing of tobacco farmers and the technical efficiency and income.In analyzing the impact of production outsourcing on the technical efficiency of tobacco farmers,this study uses a combination of instrumental variable method and stochastic frontier model,matching method and stochastic frontier approach to more accurately estimate the impact of outsourcing on the technical efficiency of tobacco farmers.When analyzing the mechanism of outsourcing on income,this study chooses the propensity score matching approach and genetic matching approach to solve the estimation bias and sample self-selection problem,which is rare in existing literature.