Agriculture Reference

In-Depth Information

Similarly, INSTITUTION was included in the crop-specific tobit equations used to

estimate the coefficients for CV and STD in table 6.6. For Louisiana we estimated these

equations for the same three crops resulting in six estimated coefficients. None of the

coefficient estimates are insignificantly different from zero. Again, for the Nebraska-South

Dakota data, we use a smaller sample to estimate the crop-specific output share equations,

resulting in a total of twenty-eight estimated coefficients. None of these coefficient estimates

were significantly different from zero.

Finally, we used FARM INCOME to test the related hypothesis that farmers with little

or no outside or “off-farm” sources of income will be more likely to share contract in

order to share risk with the landowner. FARM INCOME measures the amount of a farmer's

income derived from farming in four categories ranging from a small to high fraction. As

a result, the estimated FARM INCOME coefficients are expected to be positive for logit

estimates of contract choice and negative for tobit estimates of the farmer's share. FARM

INCOME was included in the crop-specific logit equations used for table 6.5 and in the

crop-specific tobit equations used for table 6.6. For Louisiana, we estimate these equations

for four crops (cotton, rice, soybeans, sugarcane) resulting in sixteen (8 logit and 8 tobit)

estimated coefficients.

Consider the estimates derived from the logit equations specified in table 6.5. For

Louisiana, we find that all eight estimated coefficients are negative, rather than positive, and

six of these are significant. None are positive and significant. Conducting the same exercise

for the Nebraska-South Dakota data results in twenty-eight estimated coefficients. All es-

timated coefficients for FARM INCOME are negative and nine are significant. Contrary to

the risk-sharing prediction, none of the estimated coefficients are positive and significantly

different from zero.

FARM INCOME was also included in the crop-specific tobit equations used to estimate

the coefficients for CV and STD in table 6.5. For Louisiana, we estimated these equations

for the same four crops resulting in eight estimated coefficients. Again, we found that none

of the coefficient estimates are significantly different from zero. For the Nebraska-South

Dakota data, we obtain twenty-eight estimated coefficients and find that none are negative

and significantly different from zero. Furthermore, six estimated coefficients are positive

and significant. Overall, like the estimates of coefficients for FUTURES MARKET and

INSTITUTION, the estimates for FARM INCOME do not support risk sharing.

6.4

Back to Risk Neutrality

The evidence presented in this chapter fails to support the standard risk-sharing model,

which has dominated the study of contracts in agriculture and beyond. In particular, the