Factors Influencing the Stability of Contract Farming: An Empirical Study in China

This paper aimed to study the factors influencing the stability of contract farming. The empirical basis for our analysis was the data survey of 332 fruit households in China in 2017 and 2018. The main result of this study was that contract stability was significantly influenced by household characteristics, production characteristics, and contract terms. Specifically, the constraints in education, family asset, and farm scale were related to a higher rate of farmers’ contract breach; contract terms with floor pricing, bonus, and long duration were associated with a lower rate of farmers’ contract breach. Additionally, we found that farmers with greater risk aversion and patience were less likely to breach their contracts. Furthermore, the subsample result showed that farmers might be heterogeneous regarding the factors influencing contract breach. Contract stability is a relatively less researched dimension of contract farming, and we expect the paper to be a good addition to the existing literature on contract farming.