Do state-subsidized contractual arrangements improve farmers’ income? Empirical evidence from Algeria

Abstract

To modernize agricultural value chains, some governments subsidize contract prices paid to farmers by private firms to encourage them to adopt contract farming. The impact of price-subsidized contracts on farmers’ incomes has not yet been evaluated. To help fill this gap, we evaluated the impact of a contractual arrangement with a subsidized sales price implemented by a tomato cannery in Algeria. Our results showed that the arrangement increased profits by securing outlets and sales prices. The success of the Algerian intervention lies in generating a price premium and in combining public financial capacity and private governance of the contractual scheme.