Safe Gambles? Farmer perceptions of transactional certainty and risk-return tradeoffs in contract farming schemes in Southern India

Abstract

This paper examines the idea that contract farming arrangements in developing countries even while offering farmers insurance against certain kinds of risks could simultaneously exacerbate other risks or entail new risks of their own. If correct, farmer perceptions of risks and returns would vary systematically across farmers with different contracting status and also across schemes. Using survey data that elicits subjective distributions of returns and psychometric mapping of risk perceptions from farmers, the study finds that contract farming, not unlike its alternatives, is associated with multiple dimensions of uncertainty and sources of risk, in ways that likely influence participation.