Abstract:
The global demand for cashew nuts continues to increase steadily. However, many
African countries face difficulties in marketing and adding value to the product. Using
recent survey data of 391 cashew farmers in Ghana, this paper contributes to the growing evidence on the significance of contract farming (CF) in improving the welfare
of rural households in developing countries. Specifically, the paper analyzes the factors that influence cashew farmers’ decisions to participate in CF, and the impact
of participation on farmers’ performance. We employ a recently developed switching regression model with endogenous explanatory variables and endogenous switching to control for selection bias caused by observable and unobservable factors. The
empirical results show that participation in CF significantly increases labor productivity and price margins, as well as cashew yields, and net revenues. A disaggregated
analysis of the sample into farm size categories reveals that small-sized cashew farms
tend to benefit more through CF, compared to medium- and large-sized farms
