Agriculture Reference

In-Depth Information

Table 7.4

Summary statistics for new farmers and landowners: Share contracts

Variables

Only a new farmer

Only a new landowner

Number of contracts (%)

264 (100)

115 (100)

Share of inputs changed (%)

47 (17.8)

18 (15.6)

Number of shared inputs changed (%)

37 (14)

8 (6.9)

Lease changed to cropshare (%)

36 (13.6)

10 (8.6)

Farmer's share dropped (%)

15 (5.7)

10 (8.7)

Farmer's share increased (%)

20 (7.5)

5 (4.3)

the null hypothesis of no ratchet effect. Prediction 7.2 implies that the presence of a new

landowner should increase the probability of a share contract; the estimated coefficient for

NEW LANDOWNER is expected to be positive. In three cases the estimated coefficients

are negative and in all four specifications the standard errors are too large to allow statistical

significance. Overall then, the estimates shown in table 7.2 fail to reject the null hypothesis

of no ratchet effects and suggest that ratchet effects are not present in the choice of land

leasing contract.

Changes in Share Contracts

The second set of empirical tests examines the determinants of particular sharing rules

within cropshare contracts in order to test predictions 7.3 and 7.4. Table 7.4 reports some

summary statistics for cases in which a new landowner or farmer is involved in the cropshare

contract. The data in table 7.4 are generally inconsistent with ratchet effects existing within

the set of all share contracts. When there is a new farmer, both input cost shares and

the number of inputs change, which refutes prediction 7.3 that states they should remain

constant. The output share to the farmer increased more often than it decreased, which is

consistent with prediction 7.3. Furthermore, when there is a new landowner input cost shares

change less often and output shares decrease more often than they increase. However, the

difference in proportions between the two samples is not statistically significant.
20

In order to further test predictions 7.3 and 7.4, we use several samples containing only

share contracts to estimate the following model:

ln(s
i
/(

1

−
s
i
))
=
Z
i
φ
i
+
i

,

(7.10)

th

where

s
i

is the farmer's share of the output for the

i

contract, Z is a row vector of

is an error term.
21

Table 7.5 presents the results from four OLS estimations of equation (7.10). As in

the logit estimates, the variables NEW FARMER and NEW LANDOWNER are used.

explanatory variables,

φ

is a column vector of unknown coefficients, and