Rural modernisation through intensive vegetable farming agribusiness in Indonesia

ABSTRACT Traditional farming that changes to profitable agribusiness can serve a machine for rural modernisation. This article assesses factors that determined the decision of smallholder vegetable producers to participate in vegetable-based agribusiness and analyses the impact of agribusiness participation and other determinants on the economic returns. Structural equation modelling was employed to show a proposed model of cumulative causation theory. Data were compiled from a quantitative survey of 357 selected farm households located in major vegetable-producing areas of Bali and Java, Indonesia. Results show that human capital and household endowment motivated farmers to participate in vegetable-based agribusiness. Women's participation significantly contributed to agribusiness participation and agribusiness participation led to income generation. Opportunities exist to expand vegetable-based agribusiness and increase farmers’ income by providing adequate access to transportation infrastructure, an advantageous agribusiness environment, and investing in human capital through training and extension services.