Determinants and impacts of contract farming on bean production, income, and prices in Bangladesh: Evidence from propensity score matching

Abstract

This study evaluates the impact of contract farming on bean production, farm income, and output prices in Bangladesh. Using primary data collected from 300 bean growers in Narsingdi district, the study employs Propensity Score Matching (PSM) to compute the average treatment effect on the treated (ATT), supplemented with Inverse Probability Weighting (IPW) and Inverse Probability Weighted Regression Adjustment (IPWRA) to ensure robustness. The determinants of farmers' participation in contract farming are first identified using a probit model. The results indicate that number of trainings, bean cultivation area, access to off farm income significantly increase the likelihood of participation, whereas bicycle ownership, organizational membership reduce participation probability. Impact estimates consistently show that contract farming significantly improves farm performance. Contract farmers achieve 3.4 - 5.2% higher bean yields, 33.2 - 36.1% higher gross margins, 47.4 - 49.4% higher net revenues, and receive 26.6 - 27.4% higher output prices than comparable non-contract farmers. Robustness checks using IPW and IPWRA confirm these findings. The results suggest that contract farming can enhance smallholder market integration and income in Bangladesh, although supportive institutional mechanisms and farmer awareness remain critical for sustained benefits.