How Effective Public Policies Improve Farmers’ Economic Welfare: The Serial Mediating Roles of Innovation Adoption and Productivity in Tobacco Farming

This study examines the causal mechanisms through which the effectiveness of public policy influences the economic welfare of tobacco farmers in Madura, Indonesia. Using survey data from tobacco farmers and applying structural equation modelling partial least squares (SEM-PLS), the study analyses the direct effects of policy effectiveness on innovation adoption, farmer productivity and economic welfare, as well as the mediating and serial mediating roles of innovation adoption and productivity. The findings demonstrate that public policy effectiveness significantly enhances innovation adoption, productivity and economic welfare. Innovation adoption improves productivity and welfare, while productivity directly strengthens welfare outcomes. Mediation analysis confirms that innovation adoption and productivity function as both individual and sequential mediators. This indicates that welfare gains are primarily achieved through policy-driven innovation uptake and productivity improvements, rather than through the direct effects of policy alone. Despite limitations relating to the cross-sectional nature of the data and the focus on economic welfare, the study provides valuable insights for the design of innovation-oriented agricultural interventions aimed at promoting sustainable welfare among smallholder farmers.