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 Do Land Ownership and Contract Farming Matter? Evidence from a
large-scale investment in Ghana

By:

Susanne Johanna Väth and Michael Kirk

Invited paper presented at the 4th International Conference of the African Association
of Agricultural Economists, September 22-25, 2013, Hammamet, Tunisia

Copyright 2013 by [authors]. All rights reserved. Readers may make verbatim copies of
this document for non-commercial purposes by any means, provided that this copyright
notice appears on all such copies.
 PRELIMINARY DRAFT

Do land ownership and contract farming matter?

Evidence from a large-scale investment in Ghana*

SUSANNE JOHANNA VÄTH AND MICHAEL KIRK

Institute for Co-operation in Developing Countries, Philipps-University Marburg, Am Plan 2,

35037 Marburg, Germany
Email: vaeth@staff.uni-marburg.de

ABSTRACT

With the rising demand for agricultural land it becomes incrementally important to design
land deals as a win-win for investors and the local population. Accordingly, our in-depth
analysis focuses on two aspects: (i) the effects of inclusive business models, and (ii) the
importance of secure land use rights for farmers adjacent to large-scale, land-based
investment. We analyse empirically the case of an oil palm investment in the Eastern Region
of Ghana in 2010 comparing contracted outgrowers and independent oil palm farmers.
Although we argue that the contractual treatment was allocated as in a quasi-natural
experiment, we introduce an instrumental variable (IV) to remove possible doubts. Thus, we
exploit the fact that highly affected outgrowers rather tend to position themselves, whereas
less affected independent farmers respond rather in a rather neutral manner to a retrospective
question on their satisfaction with the investment’s establishment. To avoid correlations with
the error term, we suggest the absolute value of the deviation from a neutral response as
instrument.
We find that contract farming has a significantly negative effect on short-term measurements
like agricultural household income and plot profit per acre, while its effect on long-term
measurements like asset endowment and perceived future security is significantly positive.
Analyses reveal moreover, that complete property rights, as well as solely the right to use the
land as collateral, have a significantly positive effect on both short-term and long-term
measurements.

*
This draft of our work in progress was prepared for the 4th International Conference of African Association of
Agricultural Economists “Commercializing Agriculture in Africa: Social, Economic and Environmental
Impacts” Hammamet, Tunisa, 22 – 25 September 2013. Please do not cite without permission of the authors. We
thank the “Market-oriented Agriculture Programme” (MOAP) in Ghana, a joint programme of the Federal
Republic of Germany and the Ministry of Food and Agriculture of the Republic of Ghana (MOFA) and the
sector project ‘Land Policy and Land Management’, a planning unit of the German Agency for International Co-
operation (Deutsche Gesellschaft für Internationale Zusammenarbeit – GIZ) for their financial support. We are
also grateful for the valuable comments and suggestions by Simone Gobien, Klaus Deininger, Martin Petrick,
Annelies Zoomers, Christian Traxler, Elisabeth Schulte and Kerstin Nolte. We thank Benjamin Kretzer and
Bertolt Wenzel for their support in data processing.
1
 1. Introduction

For developing countries in Sub-Saharan Africa, the agricultural sector is often the driving
force to economic development. This is also the case for Ghana, where it contributes 34% to
the GDP (World Bank, 2011). As approximately 80% of the food and cash crop output is
produced by small-scale farmers who hold roughly 90% of the land, the agricultural sector
employs with 55% more than half of Ghana’s active economic population (Chamberlin, 2008;
World Bank, 2011).

However, in order to foster economic development and to eradicate poverty, developing

countries need to overcome their chronically financial shortages in the agricultural sector.
According to the FAO (2008) world’s agriculture requires at least an additional investment of
30 billion USD annually to halve the world’s hungry by 2015. This amount by far surpasses
the budget of Official Development Assistance (ODA) and non-profit organisations (FAO,
2008). Therefore, private sector investment remains crucial to defeat prevailing low
agricultural productivity.

Driven by the latest food, fuel, and financial crises private (and public) investors from all over
the world re-discovered the agricultural sector and demand what developing countries have to
offer: large-tracts of arable land (von Braun and Meinzen-Dick, 2009; De Schutter, 2009;
Cotula and Vermeulen, 2009; Deininger and Byerlee 2011). Thereby, investors’ quest for
food and fodder, industrial raw materials, bio mass or safe financial investment does not
necessarily match with host countries’ demand for infrastructure development, employment
creation and technology transfer (Cotula and Vermeulen, 2011).

Caused by a lack of a proper legal framework appropriately recognising customary law, weak
institutional linkages between various actors at different levels, as well as difficulties in
implementation, documentation and enforcement of rules and regulations, land acquisitions
are endangered to happen at the cost of the local population and to be accompanied by all kind
of rent-seeking activities as well as elite capture (von Braun and Meinzen-Dick, 2009; Cotula
and Vermeulen, 2009; for Ghana: Schoneveld et al., 2010).

Although risks are high and institutional environments are challenging, large-scale investment
in agricultural land can (and shall) not per se be doomed to failure (HLPE, 2011); too urgent
is the need to close yield gaps, too long would it take to wait for favourable institutional
environments in developing countries. Hence, it is worth to learn from experience in a rather
welfare-maximising country like Ghana because fairly beneficial investor-local population
linkages in conjunction with large-scale agricultural investment – if they exist – are more
likely to be found in a progress making economy on a democratic fundament.

For our case study we selected the oil palm sector as an example for an underfinanced
agricultural sub-sector. Even though Southern Ghana is geographically well suited for tree
crops, and palm oil counts not only as the backbone of the Ghanaian kitchen, but also as
important ingredient for soap production, cosmetics, pharmaceutical, chemical and food
2
manufacturing industry, as well as for bio energy plants, Ghana is still a net palm oil importer
unable to satisfy its own increasing demand (Poku and Asante, 2008). In order to diversify the
agricultural sector and to improve on this status quo, oil palm amongst others was identified
as a promising sub-sector for export growth and received consequently public support by one
of four Presidential Special Initiatives (Chandra and Osario-Rodarte, 2007).

The structure of the sub-sector is simple. Since government-backed investment based on land
expropriation by the military government in the 1970s, five large-scale nowadays privatised
investments dominate the sector against thousands of small-scale farmers, who are cultivating
roughly 85% of estimated 285,000 ha of oil palm plantations (Poku and Asante, 2008).2 Due
to the fact that the capacity of established large-scale mills is too high for the big players’
plantations, investors are forced to get additional fresh fruit bunches.

But as land ownership in Ghana is fragmented among various stools,3 families, and
individuals, the acquisition of additional land tracts for conversion into large-scale oil palm
plantation is rarely possible given the widespread unwillingness to lease land on a long-term
basis to foreigners (Kasanga and Kotey, 2001).4 Therefore, investors were forced to link up
with small-scale farmers. With government initiative and donor support this led over the last
three decades to the implementation and manifestation of contract farming with the investors’
aim to run their mills economically efficient and the public intention to overcome the
persistent yield gap between large-scale plantations and small land holdings.

If such linkages facilitate win-win situations between investors and the local population shall
be discussed within this paper. Our quantitative data consist of a household survey, which was
conducted within the catchment area of one investor. We interviewed (i) outgrower farmers,
who cultivate oil palm on land which they either own or where they hold at least land use
rights for 25 years, as well as (iv) independent oil palm farmers, who are free to sell their
fresh fruit bunches to any willing buyer.

But we do not focus solely on contractual arrangements; several studies highlight the
importance of the underlying property rights setting within a system of weak land
administration and strong customary tenure (for Ghana: Goldstein and Udry, 2008). We
expect secure land use rights to be a crucial factor for the welfare of rural households. Hence,
our estimations will also consider different bundles of property rights with varying degrees of
formalisation.

Our paper starts with the derivation of hypotheses on potential effects of contract farming and
property rights (section 2). After the investor under consideration was introduced, a
summarised background of the particular setting in Ghana is given (section 3). The next
section will provide an overview of our data base and first descriptive analyses (section 4). In
the empirical part (section 5) we present far reaching OLS and 2SLS regressions in order to

2
Within the Ghanaian oil palm sector there are only very few medium-sized establishments.
3
In Southern Ghana various chiefs hold the allodial titles for land. Those chieftancies are called stools.
4
In comparison to huge destruction of primary forests in Asia, oil palm cultivation in Ghana is less
environmentally sensitive, as (i) there are hardly areas with remaining primary forests (apart from protected
reserves) to destroy, and (ii) as fragmented land holding does not allow further transformation into large-scale
monoculture.
3
estimate household’s agricultural income, plot profit per acre, asset endowment and perceived
future security against our hypotheses. Finally, we put quantitative results into perspective
and present our conclusions (section 6).

2. Potential effects of contract farming and land ownership

In order to foster win-win situations for large-scale investment in agricultural land, inclusive
business models are often propagated. Thereby, contract farming can help rural farmers to
overcome various factor market shortages resulting in a better integration into the value-chain
and consequently higher income (Minot, 1986, Miyata, 2009).

If we split agricultural production into the five factors (i) labour, (ii) land, (iii) credit, (iv)
purchased inputs, and (v) technology, we can define 2+3 contract farming. The household
provides labour and land, whereas an investor offers the remaining factors. Thus, outgrower
schemes facilitate access to credit, high value inputs as well as extension services, which are
often, neither with respect to quality nor in regard to accessibility, available in rural areas
(Glover, 1984).

Another aspect which is often linked to contract farming is risk sharing. With a contractual
arrangement households secure the sales of their produce regardless from peak and lean
seasons. In the frame of Williamsons’ concept of hierarchical integration (1975), contract
farming can be seen as a mixture of flexible and stable elements, pairing the freedom of an
entrepreneur with risk sharing through integration into the value-chain. Consequently, we
expect a positive effect and suggest therefore the following hypothesis:

H1: Contract farming has a positive influence on welfare measurements (i.e.

agricultural income, plot profit per acre, asset endowment, and perceived future
security).

The establishment of a large-scale agricultural investment has an effect on the availability of

land in the respective area. Due to the fact that less land will be available the pressure on the
remaining areas raises. Thus, it is important that the allocation of land use rights is secure.
Given the fact that titles are often missing, tenure security can be challenging.

Nonetheless, expected benefits of large-scale investment like technology transfer or value-

chain integration via inclusive business models can only materialise if rural households’
agricultural production is based on secure land use rights. According to Deininger and Feder
(2009) secure land rights provide incentives for long-term investments which are expected to
increase productivity. Furthermore, they often serve as collateral which facilitates credit
access (Feder and Nishio, 1999; Carter and Olinto, 2003). Thereby, the security on the land
and perceived tenure security is rather crucial than complete property rights (Dekker, 2003).
Thus, we see secure land rights as fundamental to increase rural households’ income. Our
second hypothesis follows subsequently:

4
 H2: Secure land use rights have a positive influence on welfare measurements (i.e.
agricultural income, plot profit per acre, and perceived future security).

3. Background of the case study

Ghana Oil Palm Development Company (GOPDC) is with an annually extraction of 35,000
tons of palm oil and palm kernel oil the biggest palm oil producer in Ghana. It is located in
the Kwaebibirem District, which is climatically favourable to oil palm cultivation. In 1995 the
company was privatised and the Belgian investor Société d’Investissement pour l’Agriculture
Tropicale (SIAT) took over the majority shares of the former state-owned company (GOPDC
and SIAT, online).

With divestiture, the state transferred a 50-years leasehold (as of 1976) for the so-called Kwae
concession, which covers 8,953 ha including the mill and the housing structure, directly to the
investor. For the 5,205 ha of the so-called Okumaning concession another 50-years leasehold
(as of 2000) has been given out later for further expansion of oil palm in the area.5

Complementary to the plantation system, outgrower schemes were established from 1986
onwards with the aim to run the mill economically efficient. The company decided to offer a
contract to those farmers who had secure land use rights for a ready-to-cultivate plot in a
specific area at a specific point in time. This means GOPDC’s management selected
arbitrarily areas and decided upon the point in time when to start contract farming at this
location. Hence, farmers could not anticipate where and when the company might reach their
area. If they were by chance lucky to get an offer by the time their plots were cleared, they
had the possibility to reject, but de facto reported rejections were very rare. However, farmers
were only eligible to participate if they were land owners or if they could prove secure land
use rights for 25 years. The later was possible if the landlord agreed to the outgrower scheme
by signing the contract. Thus, 7,279 outgrowers were linked to GOPDC (as of 2010).

Anecdotal evidence revealed that the expansion of the outgrower scheme over the years did
not follow a clear pattern but was rather a consequence of various strategies followed in

5
Both concessions have been de facto expropriated from different chieftaincies by the military government in
1976 to set up an oil palm industry in the area. Thus, it is no surprise that compensation of the stools as holders
of the allodial titles and individual farmers as land users was rather erratic. As land was still abundant, when
operations within the Kwae concession began, only few land users had to give way to the public interest of
employment creation and agricultural commercialisation.
But in 1978 when the transformation into oil palm plantations reached the land closer to settlements, the need for
compensation and economic integration of the local population became more urgent. This marked the birth of
smallholder schemes. With the assistance of the World Bank, demarcated plots within the Kwae concession were
contracted out to farmers for oil palm cultivation. Thus, a smallholder scheme for 207 farmers was established.
Nevertheless, at a certain point a further expansion within the borders of the concession became difficult. The era
of military rule was over and indigenous villages could not be as easily removed as scattered settlers earlier. At
the same time people claimed ancestral rights, with the result that, even though GOPDC has legally proven use
rights and pays ground rent to the Government of Ghana, it abstained from 2,343 ha out of its 8,359 ha
concession to keep operational peace with its neighbours. Until recently 28 land conflicts are disputed in court
and not yet solved. They are related to smaller land tracts and can be seen as rather private concerns between
GOPDC and individuals.
5
different management epochs. Due to the fact that sites, scope and pace of expansion were
unpredictable, we assume that contractual treatment was allocated as in a quasi-natural
experiment.

In addition to outgrower schemes, GOPDC also conducts third party purchases from
independent farmers to utilise their production capacities. Within the catchment area some
3,000 independent farmers decide on the spot if they sell their produce to GOPDC or to the
competing local market. Although investor and local economy compete at input markets, their
output markets are distinct. While GOPDC fabricates standardised palm oil for industrial
purposes, small-scale mills in the area produce the locally demanded zomi (red cooking oil)
which cannot be manufactured by the investor. In order to guarantee a sufficient fresh fruit
bunch delivery, the company is thus continuously pressured to unravel its problems with the
local population. Otherwise it loses fresh fruit bunches to petty-mills.

While independent farmers are not contractually bound to the company and free to sell to
anyone, also outgrower farmers tend to breach contracts if they feel unfairly treated by
GOPDC. To prevent such side-selling GOPDC has the chance to improve its relations to the
local population by acting as a good corporate citizen or by competing with market women
for higher fresh fruit bunch prices.6 To take legal action against outgrowers seems to be no
comprehensive solution, as transaction costs are high due to slow and costly jurisdiction.

Due to this competitive setting GOPDC followed a way which is worth detailed assessment to
gain insights for the design of future inclusive business models in conjunction with large-scale
land acquisitions.

4. Data and descriptive statistics

Our quantitative analysis is based on a household survey (n= 825) which was conducted
between October and December 2010 within the catchment area of a 30 km radius around the
investor’s oil palm mill. The access to GOPDC’s database allowed us to draw a random
sampling (confidence level: 95 percent, confidence interval: 5) of 437 outgrowers out of 47
communities (see table 1). Additionally, 388 independent farmers were interviewed in a two-
stage selection process. Community size served as a stratum to choose 25 out of these 47
communities, followed by a cluster sampling in medium and large villages (while all

6
In the past the company coped with different strategies ranging from phases of higher investment in
infrastructural endowments like road construction, electricity poles, boreholes, educational institutions, as well
as medical clinics, to phases with less social responsibility activities but higher fresh fruit bunch prices for
farmers. But considering the conflict-sensitive and at the same time highly competitive environment, stable
investor-local population linkages could not yet be established. Though, common challenges of daily operations
like wage negotiations, price policies, reduced absorption capacity of the mill due to repairs, or delay of
payments due to force majeure, are always endangered to evoke dissensions. Notwithstanding, the potential for a
win-win between investor and local population is emerging in such a dynamic environment rather given than in a
context where a monopolistic investor has the power to dictate its conditions to contract farmers. Moreover, both
the prevalent fragmented land ownership and the strong customary tenure system allow scrutinising on the
importance of different bundles of property rights and secure land use with regard to uplifting the local
population.
6
independent farmers where interviewed in small villages). In order to prevent biases from
village effects, accompanying semi-structured group interviews were conducted at community
level to check for special circumstances. To avoid biases through migration effects, we
excluded migrant households who are less than 24 years – since the introduction of the
outgrower scheme – in the catchment area.

Table 1. Populations and sampling

Contractual arrangement Population size Sample size

Outgrowers (OG) 7,279 437
Independent Farmers (IF) unknown ≈ 3,000 388
Observations ≈ 10,279 825
Note: OG are based on random sampling. IF are based on a two-stage sampling with community size as strata
and clustering.

Besides this household level data, we offer an additional perspective when modifying our
sample towards a plot level data set (n= 1,224) which focuses only on oil palm plots with a
minimum age of trees of four years in order to ensure that they are already in production.
Thereby, we ignore household frontiers and distinguish between plots under outgrower
contract (685 observations) and independent plots without any contractual arrangements (539
observations).

In doing so, we put stronger emphasis on plot specific effects like received assistance from
the investor to apply certain technologies on a plot under contractual arrangement. Though, it
disregards effects like the knowledge transfer which allows the household to apply such
technologies on other plots not under contract. Such spill-over effects are therefore better
captured by the household level data, which in contrast does not permit to include plot
specific information like land use rights into the analysis. In order to take these weaknesses as
much as possible into consideration, we decided to estimate models for both data sets.

The questionnaire design finally allowed us to construct the outcome variables (i) agricultural
income, (ii) plot profit per acre and (iii) aggregated assets according to Johnson et al. (1990),
as well as perceived future security on scale from 0 to 10 according to (Cummins, 1996).
Table 2 summarises medians of those outcome variables with regard to contractual
arrangement.

Table 2. Descriptive statistics of outcome variables at household level (medians)

Outcome variable Data Outgrowers Independent Farmers Observations

Agricultural income HH level 8,204 GHS 9,324 GHS 825
Plot profit per acre Plot level 720 936 825
Aggregated assets HH level 1,122 GHS 732 GHS 1,224
Perceived future security (on a HH level 7 5 825
range from 0-10)
Note: As all outcome variables are strongly skewed to the right, medians are more informative than means. The
currency is Ghana Cedi (exchange rate as at October 1st 2010: 1 GHS = 0.70 USD).

An overview of different sets of independent variables such as (i) land use rights, (ii) oil palm
specifics, (iii) agricultural diversification, (iv) labour characteristics, (v) productive assets,

7
(vi) financial and educational specifics, (vii) socio-demographic and (viii) village
characteristics are presented in table 3.

Table 3. Descriptive statistics of independent variables (means)

Means
CATEGORIES VARIABLES Outgrowers Independent
farmers
Land use rights Share of complete property rights (%) 25.09 45.34
Share of right to use land as collateral only (%) 5.22 8.88
Own land (acre) 6.2 4.82
Land under cultivation (acre) 17.26 9.41
Having experienced land conflicts (%) 8.00 3.1
Sharecropping factor 1/3 for landlord (plot level) 73.57 45.64
Sharecropping factor 1/2 for landlord (plot level) 1.6 2.79
Average plot size 4.67 5.13
Minutes to walk to the plot (plot level) 50.94 50.61
Oil palm specifics Age of trees (plot level) 13.32 9.95
Number of pruning 1.28 1.05
Number of fertilizer application 10.60 9.27
Use of a cover crop (%) 96.33 84.53
Agric. diversification Share of land under food production (%) 5.92 2.85
Share of land under cocoa production (%) 18.45 16.89
Share of land under citrus production (%) 6.04 0.66
Labour characteristics Use of hired labour (%) 95.65 91.24
Use of household labour (%) 68.43 61.09
Head works regularly on farms (%) 38.87 33.11
Head’s 1st occupation not in agric. Sector (%) 0.91 6.44
Head’s 1st occupation in public service (%) 3.20 2.06
Productive assets Holding a chainsaw (%) 3.43 1.28
Holding a vehicle (%) 11.44 1.03
Holding a food processor (%) 3.66 0.52
Holding a generator (%) 6.17 3.87
Financial & educational Holding a bank account (%) 70.02 51.54
background Taken a loan within last 12 months (%) 18.07 5.67
Membership in a self-help group (%) 35.92 29.38
Head: basic schooling completed (%) 56.75 60.56
Socio-demographic Female-headed household (%) 11.21 7.73
characteristics Age of head 52.8 47.66
Household number 6.04 5.05
Household is Akan 74.59 74.25
Migrant household 38.21 26.75
Head: absences > 6 months in a year 5.94 10.57
Village level Big village (> 5,000) 25.40 23.20
characteristics Medium village(> 1,000 - < 5,000) 45.08 47.93
Traditional area: Bosome 2.28 3.87
Traditional area: Kotoku 46.22 40.72
Note: Means of household level data are reported unless otherwise stated.

It is important to understand that outgrowers and independent farmers are similar with regard
to socio-demographic and village level characteristics, as those characteristics are expected to
be independent from contractual treatment. Differences with regard to other independent

8
variables might be a consequence of different development paths induced by different
contractual treatment which took place years ago. Nevertheless, we focus on the effects of
being an outgrower and holding different bundles of property rights, we consequently control
for all sets of independent variables.

5. Empirical analysis

As we argued for a quasi-natural experiment we run various OLS regressions for our
dependent variables of interest (i.e. agricultural income, plot profit per acre, asset endowment
and perceived future security. Thereby, we focus on the effects of holding an outgrower
contract and on various variables on land holding.

As land rights vary from plot to plot we calculate shares of property rights for our estimations
at household level. In addition, we distinguish between (i) complete property rights, which are
reported by respondents as holding both, the right to sell the land as well as the land to use the
land as collateral, and (ii) only the reported right to use the land as collateral. At plot level we
moreover look at the possibility to acquire long-term land use rights via sharecropping
arrangements. In particular, we differentiate between a favourable arrangement, where the
landlord receives one third of the produce and a rather unfavourable arrangement, were the
tenant has to pay one half. We use these variables as proxies for ownership and usage rights
as due to the poor land administration in rural Ghana clear documentation of property rights is
missing. To emphasis on the importance of size, we also come across the acreage of total own
land (as reported), the total amount of land under cultivation and additionally the plot size.

In order to decrease the bias in estimation of survey data, we weight our sample and correct
for finite populations. To destroy any doubts on endogeneity of contractual treatment, we also
release the assumption of a quasi-natural treatment when estimating 2SLS regressions at
household level.

Therefore, we introduce an instrument which is based on a variable modified from Cummins

(1997) index of subjective well-being. In our questionnaire household heads were asked: “On
a scale from 0 to 10, where 0 is the lowest possible grade of satisfaction and 10 the highest.
How satisfied were you with the establishment of GOPDC in 1976?” We take the absolute
deviation from a neutral position with regard to satisfaction with the investment’s
establishment as instrument z and define:

z = |satisfac_estab - 5|

Thereby, the underlying idea is the following: People who are highly affected by GOPDC (i.e.
outgrowers) are rather – but not necessarily – assumed to position themselves with regard to
its establishment in a retrospective question. In contrast, people who are only indirectly
affected by GOPDC (i.e. independent farmers) are rather – but not necessarily – expected to
be neutral. To avoid linkages to the error term, we suggest the absolute deviation from 5 as an

9
appropriate instrument which satisfies the condition of being uncorrelated to the error term.
Otherwise one could suggest that happier people are rather those with higher agricultural
income, more aggregated assets or higher perceived future security (respectively the other
way around) and thus face correlation with the error term.

The data represents our assumption of positioning versus neutrality as highlighted in the box-
plot diagrams in figure 1 and figure 2.

Figure 1. Satisfaction with GOPDC’s establishment for outgrowers

Whereas for outgrowers the mean is 6.59 with a standard deviation of 2.29, for independent
farmers the standard deviation of 0.49 is far lower and around a mean of 5.07.

Figure 2. Satisfaction with GOPDC’s establishment for independent farmers

After setting the ground for analysis we start with the estimations of agricultural income. As
presented in table 4 (1) holding an outgrower scheme turned out to have a statistically
significant negative effect (-0.396) on agricultural income. This violates our first hypotheses
at this stage and rather seems surprising. In contrast, the shares of different bundles of
property rights have a statistically significant positive effect and support our second
hypothesis. With an increasing share of complete property rights, agricultural income
increases by 0.564. Already having the right to use the land as collateral makes a tremendous

10
difference of 0.420. The bigger the acreage of owned land, the less agricultural income a
household earns (-0.0133). This highly significant effect can be explained by the fact that
land-rich households rather tend to rent-out the land. Thus they gain rent income instead of
agricultural income. Finally, the size of land under cultivation has a statistically significant
positive effect of 0.149 which is very intuitive and in line with the outcome-size ratio. With
an r-squared of 26.8 % and a highly significant F-test statistic of 152.91, our estimation is
quite efficient.

Table 4. Estimation of agricultural income (log) at household level

Dependent variable: agricultural income (log)

(1) (2)
VARIABLES OLS 2SLS
coefficients SE coefficients SE
Holding an outgrower contract -0.396*** (0.0178) -0.296*** (0.0540)
Share of complete property rights (%) 0.564*** (0.0254) 0.576*** (0.0258)
Share of right to use land as collateral (%) 0.420*** (0.0347) 0.425*** (0.0348)
Own land in acre (log) -0.0133*** (0.00210) -0.0130*** (0.00212)
Land under cultivation (log) 0.149*** (0.0117) 0.134*** (0.0129)
Controls yes yes
Constant 8.362*** (0.0902) 8.496*** (0.114)

Observations 825 825

R-squared 0.268 0.266
F-test for joint significance F(41, 783) = 152.91*** F(41, 783) = 144.75***
F-test for joint significance of instrument (1st stage) F(1, 783) = 91.61***
Wooldrige’s robust score test for instrument exogen. p = 0.852
Note: Sampling is weighted and corrected for finite populations. Linearised standard errors in parentheses;
significance levels at: *** p<0.01, ** p<0.05, * p<0.1. Reference categories, where not self-explanatory:
contractual treatment: independent farmer, village size: small, traditional area: Abuakwa. Controls for oil palm
specifics, agricultural diversification, labour characteristics, productive assets, socio-economic and village level
characteristics are reported in the appendix. In the 2SLS regression holding an outgrower contract is instrument
with the absolute deviation from a neutral position with regard to satisfaction with the investment’s
establishment. 1st stage F-statistics and Wooldrige’s robust score test are for estimations without sample
correction and with robust standard errors. Estimations without sample correction with robust and clustered
standard errors at village level confirm significance levels of coefficients.

The 2SLS estimation in table 4 (2) supports these findings. All coefficients remain highly
significant and comparable in size. With an r-squared of 26.6% and an F-test of 144.75 it is
comparable to the OLS estimation. Moreover, is Wooldrige’s robust score test for instrument
exogeneity passed with a p-value of 0.852 and the first-stage F of 91.61 highly supportive to
the idea of a strong instrument.

Turning towards the estimation of plot profit per acre in a next step, we find very similar
results as presented in table 5 (1). Even though, we now take plot level data into consideration
holding a plot under outgrower contract turned out to have a statistically significant negative
effect of -0.297. The right to use the plot as collateral translates already in a positive effect of
0.330 on plot profit per acre. The top-up of having complete bundles of property right adds
only 0.026 (as the effect of both right to sell and right to use the land as collateral has a joint
effect of 0.346). Both effects are again statistically highly significant. In contrast, own land
and the plot size turned out insignificant. The fact that an increase of the land under
11
cultivation has a statistically significant negative effect of -0.182 is in line with the well
known inverse farm size productivity relation. However, an interesting aspect of the plot level
analysis is the mixed effect of sharecropping arrangements. In case a household holds a
favourable arrangement with a share factor of one third, it has a statistically significant
positive effect on its productivity (0.173), whereas a fifty-fifty agreements harms plot profit
per acre by -0176. The later finding is line with incentive theory, while the former might
supports the idea of risk and cost sharing to overcome rural factor markets imperfections.
With an r-squared of 15.4% and an F-value of 196.51, the estimation is fairly weaker.
However, as a robustness check we estimate total plot profit and as table 5 (2) shows our
variables of interest are confirmed. Even better, the r-squared of 21% and the F-value of
232.03 suggest a more efficient estimation. Solely, the formerly insignificant variable plot
size turned now out statistically significant positive (0.0961). This is expected due to the
above mentioned outcome-size relation.

Table 5. Estimation of plot profit (per acre and total) at plot level

Dependent variable: plot profit per Dependent variable: total plot

acre profit
(1) (2)
VARIABLES OLS OLS
coefficients SE coefficients SE
Plot under outgrower contract -0.297*** (0.0106) -0.346*** (0.0129)
Complete property rights 0.346*** (0.0256) 0.402*** (0.0293)
Right to use the land as collateral 0.330*** (0.0294) 0.349*** (0.0335)
Own land in acre (log) -0.00132 (0.00126) -0.00214 (0.00163)
Land under cultivation (log) -0.182*** (0.00846) -0.184*** (0.00979)
Sharecropping factor 1/3 for 0.173*** (0.0230) 0.188*** (0.0261)
landlord
Sharecropping factor 1/2 for -0.176*** (0.0330) -0.226*** (0.0379)
landlord
Plot size 0.000472 (0.00160) 0.0961*** (0.00283)
Controls Yes yes
Constant 6.540*** (0.0765) 7.315*** (0.0925)

Observations 1,224 1,224

R-squared 0.154 0.210
F-test for joint significance F(39, 1184) = 196.51*** F(39, 1184) = 232.03***
Note: Sampling is weighted and corrected for finite populations. Linearised standard errors in parentheses;
significance levels at: *** p<0.01, ** p<0.05, * p<0.1. Reference categories, where not self-explanatory:
contractual treatment: independent plot, village size: small, traditional area: Abuakwa. Controls for plot level
characteristics, oil palm specifics, labour characteristics, productive assets, socio-economic and village level
characteristics are reported in the appendix. Estimations without sample correction with robust and clustered
standard errors at village level confirm significance levels of coefficients.

To get a better idea why our first hypothesis is again rejected, we now exclude independent
farmers’ household from the plot level data set and focus on the estimation of independently
and under contract farmed plots by households who hold at least one outgrower contract.
Again, we look at the dependent variables plot profit per acre (table 6 (1)) and in total (table 6
(2)).

12
Table 6. Estimation of plot profit (per acre and total) for outgrower plots only

Dependent variable: plot profit per Dependent variable: total plot

acre profit
(1) (2)
VARIABLES OLS OLS
coefficients SE coefficients SE
Plot under outgrower contract -0.0929*** (0.0126) -0.0938*** (0.0145)
Complete property rights 0.329*** (0.0273) 0.353*** (0.0310)
Right to use the land as collateral 0.276*** (0.0331) 0.263*** (0.0370)
Own land in acre (log) -0.00552*** (0.00133) -0.00462*** (0.00156)
Land under cultivation (log) -0.107*** (0.00995) -0.0891*** (0.0111)
Sharecropping factor 1/3 for landlord 0.0943*** (0.0243) 0.101*** (0.0276)
Sharecropping factor 1/2 for landlord -0.228*** (0.0327) -0.291*** (0.0369)
Plot size -0.0103*** (0.00182) 0.0776*** (0.00325)
Controls yes yes
Constant 6.213*** (0.0883) 6.950*** (0.100)

Observations 824 824

R-squared 0.117 0.167
F-test for joint significance F(39, 784) = 109.98*** F(39, 784) = 117.35***
Sampling is weighted and corrected for finite populations. Linearised standard errors in parentheses; significance
levels at: *** p<0.01, ** p<0.05, * p<0.1. Reference categories, where not self-explanatory: contractual
treatment: independent plot, village size: small, traditional area: Abuakwa. Controls for plot level characteristics,
oil palm specifics, labour characteristics, productive assets, socio-economic and village level characteristics are
reported in the appendix.

In line with earlier estimation, we find that holding a plot under outgrower contract has a
statistically significant negative effect even though the size of coefficient is less (-0.0929 and
-0.0938). Thus, outgrower households are more productive on independently farmed plots.
This might have two reasons: (1) they have fewer incentives to be productive when they limit
their customer base to one buyer or (2) they substitute efforts to other plots or non-farm
activities. If the later holds true this might be also an explanation for the poor performance of
outgrower households with regard to agricultural income. Apart from this new insight, the
estimation fully supports findings with regard to land holding characteristics. Nevertheless, r-
squares with 11.7% and 16.7% are rather low, high F-values of 109.98 and 117.35 are
supportive.

After having analysed rather short-term oriented welfare measurements, the following sets of
regressions emphasise on long-term aspects and step back to the household level. The
estimation of aggregated assets as presented in table 7 prohibits the analysis of property rights
and land holdings due to endogeneity considerations. It nonetheless reveals an interesting
finding. Being an outgrower turned now out to have a statistically significant positive effect
on the asset endowment in both, the OLS (0.300) and the 2SLS (0.580) estimations. The high
first-stage F-value of 147.69 as well as the Wooldrige’s robust score test for instrument
exogeneity (p= 0394) support the instrumental variable regression. Moreover, for regression
the r-squares of 25.6% and 24.7% and the associated F-test statistics for joint significance (F=
332.07 and F= 334.37) call for efficient estimations.

13
Table 7. Estimation of aggregated assets at household level

Dependent variable: aggregated assets

(1) (2)
VARIABLES OLS 2SLS
coefficients SE coefficients SE
Holding an outgrower contract 0.300*** (0.0184) 0.580*** (0.0633)
Controls yes yes
Constant 5.109*** (0.0959) 5.316*** (0.113)

Observations 825 825

R-squared 0.256 0.247
F-test for joint significance F(20, 804) = 332.07*** F(20, 804) = 334.37***
F-test for joint significance of instrument (1st stage) F(1, 804) = 147.69***
Wooldrige’s robust score test for instrument exogen. p = 0.394
Note: Sampling is weighted and corrected for finite populations. Linearised standard errors in parentheses;
significance levels at: *** p<0.01, ** p<0.05, * p<0.1. Reference categories, where not self-explanatory:
contractual treatment: independent farmer, village size: small, traditional area: Abuakwa. Controls for oil palm
specifics, labour characteristics, socio-economic and village level characteristics are reported in the appendix. In
the 2SLS regression holding an outgrower contract is instrument with the absolute deviation from a neutral
position with regard to satisfaction with the investment’s establishment. 1 st stage F-statistics and Wooldrige’s
robust score test are for estimations without sample correction and with robust standard errors. Estimations
without sample correction with robust and clustered standard errors at village level confirm significance levels of
coefficients.

In our last estimations (table 8) we focus on a subjective well-being measurement to proxy for
future security. Similar as in the question with regard to GOPDC’s establishment respondents
were asked to state how satisfied they were with their future security on scale from 0 to 10.

Thereby, holding a higher share of the right to use the land as collateral has again a
statistically significant positive effect of 0.249 as shown in table 7 (1). The same holds for a
higher share of complete property rights (0.439). Even though, both coefficients for own land
in acre as well as the acreage of land under cultivation are both statistically significant
positive, it is interesting to discover that the effect of the size of cultivated land by far
surpasses the effect of the size of own land (0.353 versus 0.0112). This might be due to the
case that secure land use rights are much more important than full ownership in a setting were
land markets are defunct. The fact that favourable sharecropping arrangements also turned out
to be beneficial in earlier estimations might support this idea.

However, the most interesting finding refers to holding an outgrower contract. With a
statistically significant positive effect contract farming also has a positive effect on this
second long-term measurement. Especially, the size of the coefficient with 2.120 in
comparison to the constant of 5.772 highlights the tremendous effect on perceived future
security. Thus, the estimations of aggregated assets as well as of perceived future security
support our first hypothesis. The reasonable r-squared of 21% and the joint test for
significance (F =250.01) do not indicate difficulties with regard to estimation efficiency.
Moreover, all results are confirmed by the 2SLS estimation, which seems strong according to
an r-squared of 20.9% and F-value of 137.28 and valid with regard to a p-value of 0.768 for
Wooldrige’s robust score test for instrument exogeneity and a high first-stage F-statistic of F=
105.72.
14
Table 8. Estimation of perceived future security at household level

Dependent variable: perceived future security

(1) (2)
VARIABLES OLS 2SLS
coefficients SE coefficients SE
Holding an outgrower contract 2.120*** (0.0382) 2.339*** (0.140)
Share of complete property rights (%) 0.439*** (0.0612) 0.467*** (0.0626)
Share of right to use land as collateral (%) 0.249*** (0.0808) 0.281*** (0.0827)
Own land in acre (log) 0.0112* (0.00574) 0.0118** (0.00575)
Land under cultivation (log) 0.353*** (0.0290) 0.310*** (0.0419)
Controls yes yes
Constant 5.772*** (0.219) 5.877*** (0.230)

Observations 825 825

R-squared 0.210 0.209
F-test for joint significance F(25, 799) = 250.01*** F(25, 799) = 137.28***
F-test for joint significance of instrument (1st stage) F(1, 799) = 105.72***
Wooldrige’s robust score test for instrument exogen. p = 0.768
Note: Sampling is weighted and corrected for finite populations. Linearised standard errors in parentheses;
significance levels at: *** p<0.01, ** p<0.05, * p<0.1. Reference categories, where not self-explanatory:
contractual treatment: independent farmer, village size: small, traditional area: Abuakwa. Controls for oil palm
specifics, labour characteristics, socio-economic and village level characteristics are reported in the appendix. In
the 2SLS regression holding an outgrower contract is instrument with the absolute deviation from a neutral
position with regard to satisfaction with the investment’s establishment. 1st stage F-statistics and Wooldrige’s
robust score test are for estimations without sample correction and with robust standard errors. Estimations
without sample correction with robust and clustered standard errors at village level confirm significance levels of
coefficients.

6. Conclusion
In our sets of regression we found that property rights in all cases matter. In-depth analyses
revealed that already holding the right to use the land as collateral has a positive effect on
agricultural income, plot profit per acre, asset endowment and perceived future security.
Having complete property rights increases this effect. In addition, plot level analysis
highlighted that entering a long-term sharecropping arrangement with a favourable share
factor of one third has also a statistically significant positive effect. Apart from associated cost
and risk sharing to overcome factor market shortages, we interpret this, as another means to
assess secure land use rights for a longer period. Consequently, our hypothesis is fully
supported.

With regard to contract farming we observed mixed effects. While it has statistically
significant negative effects on the short-term measurements agricultural income and plot
profit per acre, the effect on the long-term measurements asset endowment and perceived
future security is statistically significant positive. Explanations for the poor performance on
the one hand are considerations with regard to effort substitution and principal-agent
problems. On the other hand can good performance be explained by the security offered to
vertical integration and the possibility to accumulate assets as initial inputs were offered by

15
the investor, thus household had relatively less expenses in the past. Hence overall, we see our
hypothesis partly supported.

With regard to methodological concerns are our results robust. We did not only introduce an
instrument but also perform robustness checks without sample correction, with robust and at
village level clustered standard errors, and run ordered logistic regression for the well-being
estimates.

In terms of policy implications we conclude that large-scale land investments can have
positive influences if they guarantee secure land use rights and if they integrate the local
population in the long run. Hence, contract farming offers rather long-term security as it
enhances asset endowment and increases perceived future security. Nevertheless, in the short-
run farmers are able to gain higher agricultural income and plot profit per acre when they bear
the full risk for independently managed farms. Therefore, economic integration of the local
population seems to be most beneficial if the investor aims at a mix of outgrower schemes and
buying fruits from independent farm plots.

16
Appendix

Table 9. Full estimation of agricultural income

Dependent variable: agricultural income (log)

(1) (2)
VARIABLES OLS 2SLS
coefficients SE coefficients SE
Holding an outgrower contract -0.396*** (0.0178) -0.296*** (0.0540)
Share of complete property rights (%) 0.564*** (0.0254) 0.576*** (0.0258)
Share of right to use land as collateral (%) 0.420*** (0.0347) 0.425*** (0.0348)
Own land in acre (log) -0.0133*** (0.00210) -0.0130*** (0.00212)
Land under cultivation (log) 0.149*** (0.0117) 0.134*** (0.0129)
Having experienced land conflicts -0.0235 (0.0212) -0.0286 (0.0216)
Number of pruning 0.103*** (0.0107) 0.0903*** (0.0123)
Number of fertilizer application 0.000102 (0.0130) -0.00124 (0.0130)
Use of a cover crop -0.00953 (0.0212) -0.0343 (0.0246)
Share of land under food production (%) 1.339*** (0.106) 1.219*** (0.118)
Squared share of food production -1.711*** (0.147) -1.584*** (0.158)
Share of land under cocoa production (%) 2.290*** (0.0853) 2.257*** (0.0877)
Squared share of cocoa production -1.559*** (0.143) -1.501*** (0.146)
Share of land under citrus production (%) 0.334*** (0.112) 0.283** (0.116)
Squared share of citrus production -0.0131 (0.226) -0.00605 (0.226)
Use of hired labour 0.101*** (0.0295) 0.0991*** (0.0296)
Use of household labour 0.0729*** (0.0129) 0.0664*** (0.0130)
Head works regularly on farms 0.0572*** (0.0192) 0.0221 (0.0250)
Head’s 1st occupation not in agric. sector -0.206*** (0.0233) -0.204*** (0.0232)
Head’s 1st occupation in public service -0.287*** (0.0292) -0.297*** (0.0289)
Head works as plantation worker for GOPDC 0.195*** (0.0184) 0.163*** (0.0242)
Holding a chainsaw 0.285*** (0.0332) 0.289*** (0.0328)
Holding a vehicle 0.0614*** (0.0183) 0.0525*** (0.0193)
Holding a food processor 0.110*** (0.0336) 0.101*** (0.0343)
Holding a generator -0.0135 (0.0251) -0.00405 (0.0257)
Holding a bank account 0.0302** (0.0120) 0.0275** (0.0122)
Taken a loan within last 12 months 0.0189 (0.0146) 0.00458 (0.0169)
Membership in a self-help group 0.0894*** (0.0125) 0.0882*** (0.0125)
Head: basic schooling completed -0.00462 (0.0113) -0.00221 (0.0114)
Female-headed household -0.0941*** (0.0176) -0.110*** (0.0195)
Age of head 0.0174*** (0.00274) 0.0163*** (0.00283)
Squared age of head -0.000129*** (2.54e-05) -0.000123*** (2.57e-05)
Household number -0.0104* (0.00626) -0.0222** (0.00875)
Squared household number 0.000426 (0.000383) 0.000952** (0.000471)
Household is Akan 0.0524*** (0.0130) 0.0479*** (0.0133)
Migrant household -0.00885 (0.0119) -0.0193 (0.0130)
Head is for more than 6 months absence in a year 0.00182 (0.0199) -0.00493 (0.0202)
Big village (> 5,000) 0.0740*** (0.0155) 0.0727*** (0.0155)
Medium village(> 1,000 - < 5,000) 0.0166 (0.0135) 0.0142 (0.0137)
Traditional area: Bosome -0.140*** (0.0294) -0.138*** (0.0296)
Traditional area: Kotoku -0.0408*** (0.0118) -0.0480*** (0.0126)
Constant 8.362*** (0.0902) 8.496*** (0.114)

Observations 825 825

R-squared 0.268 0.266
F-test for joint significance F(41, 783) = 152.91*** F(41, 783) = 144.75***
F-test for joint significance of instrument (1st stage) F(1, 783) = 91.61***
Wooldrige’s robust score test for instrument exogen. p = 0.852
Note: Sampling is weighted and corrected for finite populations. Linearised standard errors in parentheses; significance levels
at: *** p<0.01, ** p<0.05, * p<0.1. Reference categories, where not self-explanatory: contractual treatment: independent
farmer, village size: small, traditional area: Abuakwa. In the 2SLS regression holding an outgrower contract is instrument

17
with the absolute deviation from a neutral position with regard to satisfaction with the investment’s establishment. 1 st stage F-
statistics and Wooldrige’s robust score test are for estimation without sample correction.

Table 10. Full estimation of plot profit

Dependent variable: plot profit per Dependent variable: total plot

acre profit
(1) (2)
VARIABLES OLS OLS
coefficients SE coefficients SE
Plot under outgrower contract -0.297*** (0.0106) -0.346*** (0.0129)
Complete property rights 0.346*** (0.0256) 0.402*** (0.0293)
Right to use the land as collateral 0.330*** (0.0294) 0.349*** (0.0335)
Own land in acre (log) -0.00132 (0.00126) -0.00214 (0.00163)
Land under cultivation (log) -0.182*** (0.00846) -0.184*** (0.00979)
Having experienced land conflicts -0.135*** (0.0149) -0.151*** (0.0177)
Sharecropping factor 1/3 for landlord 0.173*** (0.0230) 0.188*** (0.0261)
Sharecropping factor 1/2 for landlord -0.176*** (0.0330) -0.226*** (0.0379)
Plot size 0.000472 (0.00160) 0.0961*** (0.00283)
Plot surround by other plots of 0.0832*** (0.00858) 0.0689*** (0.0108)
household
Minutes to walk to the plot 8.65e-05 (0.000104) 0.000127 (0.000123
Age of trees 0.0205*** (0.000781) 0.0258*** (0.000906)
Number of pruning 0.0554*** (0.00825) 0.0678*** (0.00936)
Number of fertilizer application -0.0457*** (0.00780) -0.0489*** (0.00910)
Use of cover crop 0.149*** (0.0191) 0.123*** (0.0221)
Use of hired labour 0.141*** (0.0252) 0.181*** (0.0268)
Use of household labour -0.0189* (0.00981) -0.0195* (0.0116)
Head works regularly on farms -0.0154 (0.0178) -0.0285 (0.0210)
Head’s 1st occupation not in agric. 0.187*** (0.0344) 0.125*** (0.0406)
sector
Head’s 1st occupation in public service -0.210*** (0.0286) -0.375*** (0.0387)
Head works as plantation worker for -0.0158 (0.0207) -0.0355 (0.0245)
GOPDC
Holding a chainsaw 0.399*** (0.0269) 0.457*** (0.0357)
Holding a vehicle 0.116*** (0.0159) 0.140*** (0.0205)
Holding a bank account 0.0119 (0.00938) 0.00784 (0.0107)
Taken a loan within last 12 months 0.0990*** (0.0125) 0.101*** (0.0149)
Membership in a self-help group 0.0973*** (0.00891) 0.129*** (0.0106)
Head: basic schooling completed 0.0973*** (0.00849) 0.100*** (0.00994)
Female-headed household -0.218*** (0.0140) -0.264*** (0.0158)
Age of head 0.0104*** (0.00219) 0.0118*** (0.00271)
Squared age of head -0.000100*** (1.94e-05) -0.000109*** (2.37e-05)
Household number -0.102*** (0.00512) -0.122*** (0.00582)
Squared household number 0.00568*** (0.000308) 0.00652*** (0.000337)
Household is Akan 0.00864 (0.0105) 0.000379 (0.0127)
Migrant household -0.0363*** (0.00958) -0.0487*** (0.0116)
Head is for more than 6 months absence -0.0234 (0.0220) -0.0149 (0.0259)
in a year
Big village (> 5,000) 0.0256** (0.0118) 0.0154 (0.0147)
Medium village (> 1,000 - < 5,000) -0.0323*** (0.0107) -0.0255** (0.0124)
Traditional area: Bosome 0.0378 (0.0237) 0.0975*** (0.0271)
Traditional area: Kotoku -0.0156 (0.00951) -0.0126 (0.0117)
Constant 6.540*** (0.0765) 7.315*** (0.0925)

Observations 1,224 1,224

R-squared 0.154 0.210
F-test for joint significance F(39, 1184) = 196.51*** F(39, 1184) = 232.03***
Note: Sampling is weighted and corrected for finite populations. Linearised standard errors in parentheses;
significance levels at: *** p<0.01, ** p<0.05, * p<0.1. Reference categories, where not self-explanatory:
contractual treatment: independent plot, village size: small, traditional area: Abuakwa.
18
Table 11. Full estimation of plot profit for outgrowers only

Dependent variable: plot profit per Dependent variable: total plot

acre profit
(1) (2)
VARIABLES OLS OLS
coefficients SE coefficients SE
Plot under outgrower contract -0.0929*** (0.0126) -0.0938*** (0.0145)
Complete property rights 0.329*** (0.0273) 0.353*** (0.0310)
Right to use the land as collateral 0.276*** (0.0331) 0.263*** (0.0370)
Own land in acre (log) -0.00552*** (0.00133) -0.00462*** (0.00156)
Land under cultivation (log) -0.107*** (0.00995) -0.0891*** (0.0111)
Having experienced land conflicts -0.197*** (0.0156) -0.234*** (0.0182)
Sharecropping factor 1/3 for landlord 0.0943*** (0.0243) 0.101*** (0.0276)
Sharecropping factor 1/2 for landlord -0.228*** (0.0327) -0.291*** (0.0369)
Plot size -0.0103*** (0.00182) 0.0776*** (0.00325)
Plot surround by other plots of 0.0622*** (0.00937) 0.0646*** (0.0110)
household
Minutes to walk to the plot -0.000106 (0.000108) -4.20e-05 (0.000127)
Age of trees 0.0205*** (0.000814) 0.0258*** (0.000928)
Number of pruning 0.0738*** (0.00872) 0.0865*** (0.00988)
Number of fertilizer application -0.0554*** (0.0106) -0.0708*** (0.0118)
Use of cover crop 0.254*** (0.0268) 0.274*** (0.0283)
Use of hired labour 0.155*** (0.0287) 0.151*** (0.0298)
Use of household labour -0.0816*** (0.0107) -0.0818*** (0.0125)
Head works regularly on farms 0.0574*** (0.0193) 0.0866*** (0.0228)
Head’s 1st occupation not in agric. 0.557*** (0.0619) 0.527*** (0.0659)
sector
Head’s 1st occupation in public service -0.0922*** (0.0308) -0.246*** (0.0407)
Head works as plantation worker for 0.0177 (0.0209) -0.00300 (0.0246)
GOPDC
Holding a chainsaw 0.345*** (0.0299) 0.386*** (0.0394)
Holding a vehicle 0.124*** (0.0162) 0.145*** (0.0205)
Holding a bank account -0.0204* (0.0109) -0.0168 (0.0123)
Taken a loan within last 12 months 0.145*** (0.0133) 0.152*** (0.0156)
Membership in a self-help group 0.0428*** (0.00951) 0.0566*** (0.0111)
Head: basic schooling completed 0.150*** (0.00938) 0.159*** (0.0108)
Female-headed household -0.170*** (0.0152) -0.193*** (0.0170)
Age of head 0.00121 (0.00236) -0.000718 (0.00278)
Squared age of head -1.44e-05 (2.07e-05) 6.94e-06 (2.47e-05)
Household number -0.0699*** (0.00568) -0.0826*** (0.00649)
Squared household number 0.00445*** (0.000330) 0.00506*** (0.000361)
Household is Akan 0.0411*** (0.0115) 0.0483*** (0.0138)
Migrant household 0.00105 (0.0101) 0.00224 (0.0121)
Head is for more than 6 months absence 0.0332 (0.0253) 0.0490* (0.0291)
in a year
Big village (> 5,000) 0.0776*** (0.0131) 0.0882*** (0.0154)
Medium village (> 1,000 - < 5,000) -0.0177 (0.0117) -0.00149 (0.0133)
Traditional area: Bosome -0.185*** (0.0274) -0.185*** (0.0308)
Traditional area: Kotoku -0.0446*** (0.0107) -0.0608*** (0.0127)
Constant 6.213*** (0.0883) 6.950*** (0.100)

Observations 824 824

R-squared 0.117 0.167
F-test for joint significance F(39, 784) = 109.98*** F(39, 784) = 117.35***
Note: Sampling is weighted and corrected for finite populations. Linearised standard errors in parentheses;
significance levels at: *** p<0.01, ** p<0.05, * p<0.1. Reference categories, where not self-explanatory:
contractual treatment: independent plot, village size: small, traditional area: Abuakwa.

19
Table 12. Full estimation of aggregated assets

Dependent variable: aggregated assets

(1) (2)
VARIABLES OLS 2SLS
coefficients SE coefficients SE
Holding an outgrower contract 0.300*** (0.0184) 0.580*** (0.0633)
Head’s 1st occupation not in agric. sector 0.497*** (0.0482) 0.545*** (0.0487)
Head’s 1st occupation in public service 0.436*** (0.0431) 0.413*** (0.0425)
Head works as plantation worker for GOPDC -0.101*** (0.0327) -0.203*** (0.0390)
Holding a bank account 0.743*** (0.0150) 0.709*** (0.0171)
Taken a loan within last 12 months 0.0426** (0.0194) 0.000230 (0.0205)
Membership in a self-help group 0.0817*** (0.0159) 0.0771*** (0.0161)
Head: basic schooling completed 0.132*** (0.0145) 0.143*** (0.0147)
Female-headed household -0.462*** (0.0240) -0.511*** (0.0270)
Age of head 0.0188*** (0.00351) 0.0118*** (0.00403)
Squared age of head -0.000215*** (3.24e-05) -0.000167*** (3.58e-05)
Household number 0.0726*** (0.00991) 0.0437*** (0.0125)
Squared household number 0.00102 (0.000655) 0.00207*** (0.000718)
Household is Akan 0.141*** (0.0195) 0.132*** (0.0194)
Migrant household 0.0596*** (0.0170) 0.0160 (0.0197)
Head is for more than 6 months absence in a year -0.0939*** (0.0316) -0.114*** (0.0328)
Big village (> 5,000) 0.388*** (0.0195) 0.387*** (0.0196)
Medium village(> 1,000 - < 5,000) 0.291*** (0.0193) 0.293*** (0.0194)
Traditional area: Bosome -0.293*** (0.0457) -0.279*** (0.0481)
Traditional area: Kotoku -0.184*** (0.0154) -0.203*** (0.0158)
Constant 5.109*** (0.0959) 5.316*** (0.113)

Observations 825 825

R-squared 0.256 0.247
F-test for joint significance F(20, 804) = 332.07*** F(20, 804) = 334.37***
F-test for joint significance of instrument (1st stage) F(1, 804) = 147.69***
Wooldrige’s robust score test for instrument exogen. p = 0.394
Note: Sampling is weighted and corrected for finite populations. Linearised standard errors in parentheses;
significance levels at: *** p<0.01, ** p<0.05, * p<0.1. Reference categories, where not self-explanatory:
contractual treatment: independent farmer, village size: small, traditional area: Abuakwa. In the 2SLS regression
holding an outgrower contract is instrument with the absolute deviation from a neutral position with regard to
satisfaction with the investment’s establishment. 1st stage F-statistics and Wooldrige’s robust score test are for
estimation without sample correction.

Table 13. Full estimation of perceived future security

Dependent variable: perceived future security

(1) (2)
VARIABLES OLS OLS
coefficients SE coefficients SE
Holding an outgrower contract 2.120*** (0.0382) 2.339*** (0.140)
Share of complete property rights (%) 0.439*** (0.0612) 0.467*** (0.0626)
Share of right to use land as collateral (%) 0.249*** (0.0808) 0.281*** (0.0827)
Own land in acre (log) 0.0112* (0.00574) 0.0118** (0.00575)
Land under cultivation (log) 0.353*** (0.0290) 0.310*** (0.0419)
Having experienced land conflicts -0.0641 (0.0491) -0.0775 (0.0489)
1st occupation not in agric. sector -0.0232 (0.105) 0.0100 (0.106)
1st occupation in public service 0.421*** (0.0885) 0.397*** (0.0893)
Works as plantation worker for GOPDC -0.543*** (0.0652) -0.620*** (0.0816)
Holding a bank account 0.496*** (0.0325) 0.494*** (0.0325)
Taken a loan within last 12 months -0.0182 (0.0460) -0.0496 (0.0515)
Membership in a self-help group 0.223*** (0.0304) 0.222*** (0.0304)
Basic schooling completed 0.157* (0.0934) 0.135 (0.0942)
Female 0.417*** (0.0511) 0.364*** (0.0616)
20
Age -0.0389*** (0.00809) -0.0405*** (0.00817)
Squared age 0.000257*** (7.41e-05) 0.000262*** (7.44e-05)
Household number -0.346*** (0.0170) -0.364*** (0.0199)
Squared household number 0.0182*** (0.00119) 0.0190*** (0.00127)
Akan 0.0657** (0.0325) 0.0804** (0.0335)
Migrant -0.175*** (0.0382) -0.189*** (0.0393)
For more than 6 months absence in a year 0.0920*** (0.0128) 0.0843*** (0.0137)
Big village (> 5,000) -0.0298 (0.0417) -0.0338 (0.0419)
Medium village(> 1,000 - < 5,000) -0.119*** (0.0381) -0.121*** (0.0382)
Traditional area: Bosome -0.285*** (0.102) -0.279*** (0.102)
Traditional area: Kotoku 0.153*** (0.0319) 0.138*** (0.0327)
Constant 5.772*** (0.219) 5.877*** (0.230)

Observations 825 825

R-squared 0.210 0.209
F-test for joint significance F(25, 799) = 250.01*** F(25, 799) = 137.28***
F-test for joint significance of instrument (1st stage) F(1, 799) = 105.72***
Wooldrige’s robust score test for instrument exogen. p = 0.768
Note: Sampling is weighted and corrected for finite populations. Linearised standard errors in parentheses;
significance levels at: *** p<0.01, ** p<0.05, * p<0.1. Reference categories, where not self-explanatory:
contractual treatment: independent farmer, village size: small, traditional area: Abuakwa. In the 2SLS regression
holding an outgrower contract is instrument with the absolute deviation from a neutral position with regard to
satisfaction with the investment’s establishment. 1st stage F-statistics and Wooldrige’s robust score test are for
estimation without sample correction.

21
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