they include adjustable cost leases, cash-share combinations, and other nonstandard agreements (U.S. Department
of Commerce, Bureau of the Census 1999). This represents a slight increase (from 6%) from 1988 (AELOS 1988).
18. In British Columbia the Ministry of Agriculture divides the province into several large regions for statistical
purposes that tend to be much larger than American counties, hence, it is more likely the landowner lives in the
same municipality as the rented land, but they still could be quite distant and not monitor farmers closely.
19. Newberry and Stiglitz (1979) forcefully argue this point and have influenced later writers, such as F. Allen
(1985) and Hurwicz and Shapiro (1978). Eswaran and Kotwal (1985) develop a model that explains why fifty-fifty
is common, but also questioned the validity of the claim for only fifty-fifty sharing.
20. Share contracts come in two dominant forms: those that simply share the output, with the farmer paying for
all of the inputs; and those that share both the output and the input costs other than the land and labor. Chapter 5
is entirely devoted to the issue of input sharing.
21. Roy (1963) gives an early account of contracting practices in agriculture. See Perry et al. (1997) for a recent
overview. They find that in 1993 such contracts covered almost one-third of the value of U.S. farm production, on
22. U.S. Department of Commerce, Bureau of the Census, (1993), Table 848, p. 531.
23. U.S. Department of Commerce, Bureau of the Census (1993), Table 47, p. 63.
24. These changes include the introduction of railroads, refrigeration, chemical fertilizers, tractors, and combines
to name a few.
25. Mighell and Jones (1963) were the first to carefully document the extent of vertical coordination across
26. In chapter 6 we also use data on landowner-farmer contracts from British Columbia during the 1979 crop year.
These data were collected by telephone survey and provide information on 378 contracts and have fewer variables
than the other data we use.
27. There exist large numbers of very small farms in both Canada and the United States. In terms of total output,
these farms produce very little. The presence of small farms lowers the average size and average value of farms,
while at the same time it increases the total number of farms.
Chapter 3: The Simplicity of Agricultural Contracts
1. The analysis in this chapter draws on Allen and Lueck (1992a).
2. This finding is quite common. In Illinois, Sotomayer Ellinger, and Barry (2000) also find 54 percent of contracts
are oral. In Kansas, Tsoodle and Wilson (2000) find that over 85 percent of the contracts for nonirrigated crops
are oral. In Oklahoma, Burkhart (1991) finds that the majority of contracts are oral.
3. And, as we note in chapter 1, the allocation of government payments is often specified as it is in the contract in
4. To simplify the analysis, we examine the issues of complexity and structure independently. In practice, of course,
the distinction is not always clear. The structure of a contract can be used to provide incentives on margins that
could otherwise be observed by a third party and enforced by a market or court. Likewise, measurement could be
used as a substitute for structure of margins that are difficult to observe.
5. Unlike in the other chapters, we do not develop a formal model but instead rely on an extensive literature.
6. The literature on specific assets and their role in contracts and vertical integration is large, with substantial
empirical support (for example, Joskow 1987; Masten 1985). Hart's (1995) property rights theory of the firm is
one of the more recent works that relies heavily on the presence of specific assets to explain ownership. Indeed,
without specific assets, ownership has no effect in his model. Recently the most famous case study of this theory,
Fisher Body and General Motors, has come under attack. Coase (2000) and others in the same issue argue that
specific assets were not a major factor in explaining the merger of the two firms. Hansmann (1996) and Holmstr om
and Roberts (1998) also put less emphasis on specific assets as a factor determining ownership.