Agriculture Reference
In-Depth Information
12. Similarly, Carmona and Simpson (1999) find that when Catalan vineyard share contracts introduced input cost
sharing, the farmer's share declined. Taylor (1910) found widespread use of share contracts in Wisconsin during
the late 1800s and early 1900s; he noted that typical cropshares were one-third to landowners, but were 50-50
when input costs were also shared.
13. Although it is true that these “nonmarket” inputs can occasionally be purchased in the market, they are generally
provided by the farmer.
14. The obvious exception is seed. Later we address this apparent anomaly.
15. In separate equations, we used a dummy variable that measured whether or not the inputs had long-term effects
on the land by increasing the value of the land beyond the production of the current crop. If the input enhances the
value of the land, then the landowner is more likely to share the costs in order to maximize the contract value of
the land lease. As expected, this variable had a negative effect on the probability of the farmer's paying all input
costs. Because nearly all of these long-term inputs are market inputs, the MARKET coefficient also captures this
effect.
16. Because we include those few cases where the input share does not equal 100 percent of the cropshare, our
sample size for these equations is slightly larger than for the logit estimates of contract choice in table 5.9.
17. This reputation effect is consistent with our findings in chapter 3.
18. This discreteness has also been found in Kansas (Tsoodle and Wilson 2000) where the most common share is
67-33 (65-70%) with 60-40 and 50-50 each accounting for about 15 percent of the contract. Less than 5 percent
of the cropshare contract in their sample have terms outside these parameters.
19.
The 1995 Cooperative Extension Service Farm Leasing Survey,
Department of Agricultural and Consumer
Economics, University of Illinois, 1996.
20. Corn makes such a practice simple, but it would be impossible with wheat which is not harvested by the row
and is subject to great losses if left standing in the field during the harvest season (see chapters 8 and 9). Even in
corn, larger modern equipment that harvests more than two rows at a time will increase the cost of this practice.
Professor Josepth Atwood (private conversation with the authors, June 3, 2002) notes this corn harvest practice is
still common in Nebraska.
21. Recent studies in Illinois (Young and Burke 2001) and Kansas (Tsoodle and Wilson 2000) also show a similar
input sharing dichotomy in their Illinois contract data. Since the 50-50 cropshare is more common in Illinois, the
data also show that 50-50 inputs sharing is also common. It should be noted that neither of these papers attempt
to explain the relationship between input and output sharing.
Chapter 6: Risk Sharing and the Choice of Contract
1. The analysis in this chapter draws on Allen and Lueck (1995, 1999a).
2. It is a moot point where the theory of contract choice based on risk aversion and incentives begins. Three early
papers certainly were Cheung (1969), Stiglitz (1974), and Harris and Raviv (1979).
3. See Chiappori and Salanie (2000) and Prendergast (1999, 2000, 2002).
4. As noted in chapter 1, Masten and Saussier (2000), draw similar conclusions.
5. Even though there have been studies of agricultural contracts that ignore differences in attitudes toward risk (for
example, Allen and Lueck 1992a, 1993a; Alston and Higgs 1982; Alston, Datta, and Nugent 1984, Eswaran and
Kotwal 1985; Laffont and Matoussi 1995), the risk-sharing model is still the standard.
6. Hayami and Otsuka (1993) note these first two points.
7. Technically, the farmer need only be more risk averse than the landowner. We follow the standard convention
and assume the landowner is risk neutral.
8. Most of these predictions have been derived elsewhere—including Hirshleifer and Riley (1992), Kawasaki and
McMillan (1987), Leland (1978), and Stiglitz (1974)—and are conveniently summarized in Hayami and Otsuka
(1993).
