How to improve the welfare of smallholders through agricultural production outsourcing: Evidence from cotton farmers in Xinjiang, Northwest China

Using a sample of cotton farmers in Xinjiang, China, this study analyses the impact of outsourcing agricultural services on three aspects of household welfare: family income, consumption expenditure and ease of labour. It separately examines the impact of outsourcing each stage of agricultural production. The three main results are as follows. (1) Overall, the outsourcing of agricultural production improves the welfare of small farmers by increasing family income, increasing consumer spending and improving ease of labour. (2) There are differences in the welfare effects of outsourcing in different production links of farmers. The outsourcing of field management link and field preparation link has a significant impact on improving the welfare of farmers. Their average treatment effects on household income, consumption expenditure and ease of labour are [1.60, 1.75], [0.39, 0.28] and [1.20, 1.02], respectively. The outsourcing of harvesting only has a significant impact on household income, the average treatment effect is 2.09, but it has no significant effect on consumer spending and ease of labour. (3) The differences in the resource endowments of peasant households means that there are differences in the scale and nature of the welfare benefits of outsourcing different stages of production. Furthermore, the differences in the resource endowments of southern and northern Xinjiang result in significant regional differences in the welfare effects of outsourcing rural household production.