Risk Attitude, Contract Arrangements and Enforcement in Food Safety Governance: A China’s Agri-Food Supply Chain Scenario

Abstract

Frequent food safety problems in recent years have seriously affected China's public health. The complexity, diversity, and technicality of food safety problems are intertwined, which constantly promotes the Chinese government and the food industry to explore effective food safety governance mechanisms. As the dominant form of vertical coordination in agri-food supply chain, contract farming is conducive to promoting farmers' safe production behavior, improving food quality and safety, and ensuring public health. However, the low contract performance rate seriously restricts the effect of contract farming on reducing the risk of food safety in China. This paper empirically investigates the role of farmers' risk attitude and contract arrangements in their enforcement. The data is derived from a household survey and economic field experiment of fruit farmers participating in contract farming in Anhui and Jiangsu provinces of China. We measure farmers' risk attitude by using an economic field experiment, and examine how risk attitude and contract arrangements affect contract enforcement with a probit model. The results show that contract enforcement is significantly (1% level) influenced by farmers' risk attitude. Farmers with greater risk aversion and loss aversion and farmers who are more accurate in evaluating probability information are more likely to fulfill the contract. Additionally, most contract arrangements have a significant effect on contract enforcement at the 5% level. Contract arrangements with floor pricing, bonus, and long duration are related to a higher rate of farmers' contract performance. Furthermore, the factors influencing contract enforcement differ based on the levels of farmer' risk attitude. The findings of the study may be conducive to formulating relevant agricultural policy to influence farmers' decision-making and thus improving food safety and ensuring public health. of 16is fixed pricing. We expect that the floor pricing mechanism is associated with a high rate of contract performance because it provides farmers with income guarantees [14]. The variable duration denotes the length of the contract between the contractor and farmers. Farmers who sign long-term contracts with the contractor tend to consider the adverse effects of contract default from their own long-term interests; the longer the duration of the contract, the greater the losses from defaulting contract. Thus, we assume that contract duration is positively related to the probability of contract performance. The variable bonus is binary and has a value of 1 if the contractor offered a bonus to farmers who complied with the contract and 0 otherwise. We expect that contract terms with a bonus are associated with a high rate of contract performance, because such bonus clause will increase the farmers' income and improve the enthusiasm of farmers cooperating with contractor [18].In addition to risk attitude and contract arrangements, contract enforcement may be influenced by other factors such as demographic and socio-econom...

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