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Contract Farming and Poverty Reduction: A Case of Organic Rice Contract Farming in Thailand

The purpose of this report is to document the results of the econometric analysis in evaluating the profitability and profit efficiency of organic rice contract farming using the Thai dataset as a comparative case.

The present study employs the profit frontier methodology to assess the profitability and profit efficiency of the sampled Thai rice farmers and to discern the key factors contributing to the differences in estimated efficiency. This study also attempts to account for selection bias using a two-stage switching regression model. The estimated models are used for subsequent “counterfactual” simulations of profit and profit efficiency. In particular, this study is set out to test the following two hypotheses:

  1. Contract rice farmers are more profitable than non-contract rice farmers for comparable scales of operation; and
  2. Contract rice farmers are more (profit) efficient than non-contract rice farmers for comparable scales of operation.

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