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The interplay of production commercialisation and specialization

The interplay of production commercialisation and specialization PurposeThe purpose of this paper is to explore the endogenous relationship between production specialisation and market commercialisation with an empirical study of farmers in Northwest China.Design/methodology/approachThe three-stage least squares were used to address simultaneity and over-identification problems in comparison with two-stage least squares (2SLS). The Durbin-Wu-Hausman test was employed to identify the endogeneity of the commercialisation and specialisation variables. The validity, relevance, and strength of the instruments were tested using the Stock-Yogo weak instrument diagnostics test.FindingsA two-way interrelationship between specialisation and commercialisation were confirmed, and suggest that farmers’ decisions on farm commercialisation and production specialisation are actually separate and interacting.Social implicationsBy demonstrating that a virtuous cycle exists between agricultural commercialisation and on-farm specialisation, policies can be formulated to complement these two effects that may help increase small holders’ income. Farmers’ market participation can be indirectly improved by combining market improvement and risk management tools to encourage production specialisation.Originality/valueThe insights of this study cast further light onto the farm market participation theory by emphasising that higher asset endowments enable small farmers to specialise in production with comparative advantage. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png China Agricultural Economic Review Emerald Publishing

The interplay of production commercialisation and specialization

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1756-137X
DOI
10.1108/CAER-08-2016-0122
Publisher site
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Abstract

PurposeThe purpose of this paper is to explore the endogenous relationship between production specialisation and market commercialisation with an empirical study of farmers in Northwest China.Design/methodology/approachThe three-stage least squares were used to address simultaneity and over-identification problems in comparison with two-stage least squares (2SLS). The Durbin-Wu-Hausman test was employed to identify the endogeneity of the commercialisation and specialisation variables. The validity, relevance, and strength of the instruments were tested using the Stock-Yogo weak instrument diagnostics test.FindingsA two-way interrelationship between specialisation and commercialisation were confirmed, and suggest that farmers’ decisions on farm commercialisation and production specialisation are actually separate and interacting.Social implicationsBy demonstrating that a virtuous cycle exists between agricultural commercialisation and on-farm specialisation, policies can be formulated to complement these two effects that may help increase small holders’ income. Farmers’ market participation can be indirectly improved by combining market improvement and risk management tools to encourage production specialisation.Originality/valueThe insights of this study cast further light onto the farm market participation theory by emphasising that higher asset endowments enable small farmers to specialise in production with comparative advantage.

Journal

China Agricultural Economic Review – Emerald Publishing

Published: Nov 6, 2017

References

  • Crop diversification in Karnataka: an economic analysis
  • Determinants of smallholder commercialization of food crops: theory and evidence from Ethiopia
  • Smallholder market participation: concepts and evidence from eastern and southern Africa