Changes in Household Behaviors through Agricultural Integration : An Empirical Analysis of Contract Farming

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The integration of agricultural production through contract farming and agricultural cooperatives has been developing rapidly in China. We conduct a farm household random sampling survey on participation in contract farming and agricultural cooperatives in two provinces (Jiangsu and Shanxi provinces) where the levels of agro-industrialization are not the same to identify the key factors which determine participation in contract farming and agricultural cooperatives. We also adopt methods of policy evaluation such as IV (Instrumental Variables) estimations and PSM (Propensity Score Matching) to confirm the effects of participation in agricultural cooperatives (or contract farming) on agricultural profitability. By comparing the results of two provinces, factors that restrict diffusion of contract farming and participation in agricultural cooperatives are considered.