Outsourcing Agricultural Services and Risk Reduction in Smallholder Rice Farming: Evidence From China and Global Implications

ABSTRACT Smallholder farmers in developing countries face the twin challenges of improving productivity and managing agricultural risks. One emerging response is outsourcing production tasks to specialized service providers. Using plot‐level data from rice farms in Jiangsu Province, China, and an endogenous treatment‐regression model, this study examines the effects of outsourcing on yields and production risks. Results show that outsourcing increases rice yields by nearly 3%, reduces yield volatility, and lowers the probability of crop failure. These benefits arise from greater access to mechanized services, the substitution of machinery for labor, and more efficient use of inputs. However, outcomes vary by type: machinery‐intensive outsourcing reduces risk, whereas labor‐intensive outsourcing can exacerbate it in weak service markets. Gains are greatest on larger and more fertile plots, underscoring the importance of policies that support mechanization and competitive service markets.