An Empirical Analysis of Vertical Integration Determinants among Peasant Farmers in Northern Algeria

Abstract

This study aims to analyze the determinants of vertical integration (ownership and contract-ing) among peasant farmers in Northern Algeria. The choice of asset control is between ownership and a simple contracting. Thus, the integration of vertical stages of agricultural produc-tion leads to higher gross margins, influencesthe choice of marketing and supply channels, and improves market participation of farmers. Three different regression models were used to determine the likelihood of a peasant household to integrate vertically (and horizontally) in its enterprise. Data were collected from 635 smallholder farmers in Northern Algeria. Farm structure, farm size, farmers' age, farmers’ level of education, seasonality, and geographical location were assumed to be the key factors in accounting for a household’s likelihood to ver-tically integrate in its farming enterprise. These key factors affect the household’s likelihood of horizontal integration. The study, then, carries the implication that policy-makers should develop increased awareness of farm structure, its scale, seasonal and spatial nature of agricultural production, as well as of some farmers’social characteristics in order to be able to improve the agricultural productivity.

Keywords

• asset ownership
• contracting; farming
• vertical integration;
• Algeria