Economic benefits of internet use for smallholder wheat farmers

ABSTRACT

This study analyses the economic benefits of Internet use, focusing on farm profit, risk exposure (skewness), and cost of risk. We use the flexible moment-based production function to derive the risk exposure indicator and the endogenous switching regression model to account for the self-selection bias. A quantile-based approach is also employed to estimate the influence of Internet use on the cost of risk. Analysing the household-level data surveyed from 558 wheat farmers in China, we find that Internet use significantly increases farm profit by 8% and reduces risk exposure by 102%. The profit-increasing effect of Internet use is achieved mainly because Internet use increases gross revenue and wheat yields but reduces production costs. Internet use also decreases the cost of risk associated with wheat production. Our findings highlight that Internet use could be an anti-risk strategy for smallholder farmers to boost farm performance and mitigate production risk and crop failure.

KEYWORDS:

• Internet use
• farm profit
• downside risk
• cost of risk
• wheat farmers

JEL CLASSIFICATION:

• D81
• L86
• O12
• Q12

Acknowledgments

Hongyun Zheng acknowledges the financial support from the Fundamental Research Funds for the Central Universities (2662022JGQD006) and National Social Sciences Foundation of China (18ZDA072).

Disclosure statement

No potential conflict of interest was reported by the authors.

Data availability statement

The data that support the findings of this study are available from Hongyun Zheng upon request.

Notes

¹ In our preliminary test, we estimated the production function using the translog and Cobb-Douglas functional form. The results of the likelihood ratio test suggest that a translog specification is more appropriate than the Cobb-Douglas specification (LR chi2 = 66.97, Prob>chi2 = 0.001).

² The IMR is defines as ${\lambda }_1=\varphi \left(C\beta \right)/\mathrm{\Phi }\left(C\beta \right)$, where $\varphi$ and $\mathrm{\Phi }$ are the cumulative distribution function and probability density function of the standard normal variable, respectively. It is generated automatically in the ESR model simulation.

Additional information

Funding

The work was supported by the Fundamental Research Funds for the Central Universities.