Complementarity in mixed farming systems enhances the smallholders income: Evidence from Punjab, Pakistan

Abstract

Mixed cropping and livestock production is a widespread farming system in less developed countries. The literature has mainly highlighted the synergistic effects between crop and livestock systems from an agronomic and environmental point of view, but has never investigated the (economic) complementarity that may exist between the two activities. Complementarity exists when mixed farming allows smallholders to earn higher incomes than in specialized systems, i.e., crop-only or livestock-only. Our paper is the first to test for complementarity in mixed farming by deriving empirical predictions from the theory of supermodularity, which are tested econometrically using a database of 360 farming households in the Punjab province of Pakistan. Our estimation results confirm the existence of a significant and positive complementary effect between crop and livestock activities, and also provide a direct measure of this effect. The smallholder can earn an average additional income of 791 rupees (out of an average total income of 12,010 rupees) by choosing mixed farming. This implies that smallholders adopt mixed farming not only for its agronomic and environmental benefits, but also because it can generate higher incomes than specialized farming systems to alleviate smallholder poverty. Apart from the choice of activity, our estimation results show that the other variables that significantly increase smallholder incomes are the education level of the household head, as well as access to urban markets, herd size, and land size. We also find that the positive impact of land expansion does not depend on the property rights regime, i.e., the additional land can be owned or rented (sharecropping). A specific public policy aimed at reducing smallholder poverty must prioritize the improvement of these key factors, especially access to urban markets and sharecropping.