The effects of Internet use on farm profit and risk exposure: Evidence from wheat production in China

Abstract

Internet use is becoming increasingly important in facilitating agricultural production and rural development. This study contributes to the literature by investigating the economic benefits of Internet use, focusing on farm profit, risk exposure (skewness), and cost of risk. The flexible moment-based production function is utilized to derive the risk exposure indicator. We employ an endogenous switching regression model that corrects selection bias due to observed and unobserved factors and a quantile-based approach to analyse the household-level data surveyed from 558 wheat farmers in major wheat-producing provinces (Shandong, Henan, and Anhui) in China. The empirical results reveal 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.