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
