Marketing contracts and technical efficiency of citrus production

Abstract

PurposeThis study examines the impacts of marketing contracts (written contracts, verbal contracts and no contracts) on technical efficiency, taking citrus production in Jiangxi Province, China, as an example.Design/methodology/approachWe first use a stochastic production frontier (SPF) model to calculate the technical efficiency scores of citrus production at the individual level. Then, we use a multinomial endogenous switching regression (MESR) model, which mitigates selection bias issues arising from observed and unobserved factors, to estimate the treatment effects of marketing contract choices on technical efficiency. Data used in this study were collected from a survey of citrus farmers conducted between October and November 2022 in Jiangxi Province, China.FindingsThe SPF model estimates show that the mean technical efficiency score of citrus production is 0.616, ranging between 0.021 and 0.894. The MESR model estimates reveal that the technical efficiency scores for written and oral contract users are 18.3 and 10.5% higher, respectively, compared to citrus farmers with no marketing contracts. Additionally, the average technical efficiency score for written contract users exceeds that of oral contract users by 2.5%. We also find that farmers with higher household incomes and less farming experience were more likely to use written contracts. At the same time, those endowed with better education, larger farm sizes and better production conditions were more likely to use verbal contracts.Originality/valueFarmers seeking marketing contracts for product sales need to adjust their production behaviour in advance to meet the product attributes required by market buyers. However, little is known about whether marketing contract users are more efficient in farm production than non-users. This study provides the first attempt to investigate the associations between different types of marketing contracts and technical efficiency.