Large-Scale Agricultural Investments and Smallholder Welfare: A Comparison of Wage Labor and Outgrower Channels in Tanzania. (February 2017)

• Record Type: Journal Article
• Authors: Herrmann, Raoul T.
• Is Part Of: World development. Volume 90(2017)
• Page Start: 294
• Page End: 310
• Publication Date: 2017-02
• Subjects: large-scale agricultural investments -- impact evaluation -- contract farming -- wage employment -- Africa -- Tanzania; Economic history -- 1990- -- Periodicals; Economic assistance -- Developing countries -- Periodicals; 330.9
• DOI: 10.1016/j.worlddev.2016.10.007
• Languages: English
• ISSNs: 0305-750X

Abstract

Highlights: I analyze household welfare effects of large-scale agricultural investments. I use household survey data of rice and sugar investments in Tanzania. Results suggest significant benefits for agro-industry workers and outgrowers. But there are large heterogeneities between channels and investments. Poorer outgrowers risk being marginalized due to rising elite capture. Summary: This article evaluates household welfare effects of large-scale agricultural investments in Tanzania, one of the main recipients of such investments in Africa. Specifically, the article compares households participating in sugar and rice investments through outgrower schemes or as agro-industry workers with non-participants in terms of household income and income poverty. Building on primary household data, it is one of the first studies to empirically analyze ex-post impacts of large-scale agricultural investments in Africa. The analysis draws on cross-section survey data of 516 households collected in Kilombero District, a priority cluster for the Southern Agricultural Growth Corridor of Tanzania (SAGCOT). The results show overall positive household welfare differences between participants of the investments and the respective counterfactual. However, there are large differences between arrangements and subsectors. Estimated effects for outgrowers are largest, yet for land-rich outgrowers more so than for land-poor. Effects for agro-industry workers in the sugar investment are significantly larger than for those in the rice investment, though in both investments land-poor workers seem to benefit. Hence, the study results suggest potential benefits of outgrower schemes and potentials of agro-industry wage employment for the land-poor to escape extreme poverty. Yet, it also stresses particularly the need to address the constraints of land-poor outgrowers. Qualitative interviews, for example, pointed to growing risks for land-poor outgrowers in the context of rising elite capture by larger outgrowers.