Does Contracting Make Farmers Happy? Evidence from Senegal

Abstract

In this paper we use a subjective well-being approach to evaluate the welfare impact of contract-farming. We analyze the impact of contract-farming on self-reported happiness using original panel data from a farm-household survey in the Niayes region in Senegal. We use different econometric techniques and show that, when correcting for time invariant unobserved heterogeneity, contract-farming has a positive effect on subjective well-being. We find diverging effects for different types of contracts, suggesting that contract-farming contributes more to farmers’ subjective well-being under certain conditions and contract design. Our main finding corroborates earlier findings from empirical studies using cross-sectional data and income-based measures of welfare. In line with earlier results from the subjective well-being literature, we find that absolute income has a positive but decreasing effect on subjective well-being while comparison income has a negative effect. Also household demographic characteristics, their land and livestock assets, and housing indicators affect subjective well-being.