Farm productivity and social sustainability in formalized value chain governance: the case of the potato industry in Pakistan

Abstract

Farm productivity and social sustainability are essential to realizing agro-based value chains’ full potential. This paper aims to empirically conduct an analysis of the impact of formal value chain governance practices on farm productivity and social sustainability in Pakistan's potato industry. A multi-stage sampling method was employed from 10 villages to examine growers’ motivations to adopt the contract and its effect on their income and farm employment. The main findings of this study stipulate that buyers’ technical assistance and provision of quality inputs are the growers’ primary motives for contracting, non-contracted farms earned 40% less than contracted farms from each unit invested, contracted farms employed more labor with better wages, and welfare arrangements than the non-contracting farms. The study concluded that formal value chain governance practices significantly affect farm productivity and social sustainability and can spur growth in the agricultural sector in developing countries. The results reveal that any governmental initiative aiming to support formal value chain governance should consider the role that intermediaries play in the value chain and accordingly minimize their risks and food losses and improve social outcomes.