Sharing Inputs and Outputs - The Nature of the Farm - page 76

Table 5.2
Definition of variables

Dependent variables
CHEMICAL APPLICATION = 1 if farmer pays 100% of chemical application cost;

= 0 if the farmer pays the same portion as his cropshare.

DRYING = 1 if farmer pays 100% of crop drying cost;

= 0 if the farmer pays the same portion as his cropshare.

ENERGY = 1 if farmer pays 100% of the irrigation energy cost;

= 0 if the farmer pays the same portion as his cropshare.

FERTILIZER = 1 if farmer pays 100% of the fertilizer cost;

= 0 if the farmer pays the same portion as his cropshare.

HARVEST = 1 if farmer pays 100% of the harvesting cost;

= 0 if the farmer pays the same portion as his cropshare.

HERBICIDE = 1 if farmer pays 100% of the herbicide cost;

= 0 if the farmer pays the same portion as his cropshare.

INSECTICIDE = 1 if farmer pays 100% of the insecticide cost;

= 0 if the farmer pays the same portion as his cropshare.

QSHARE = 1 if farmer pays all input costs;

= 0 if farmer pays input costs proportional to his output share.

Independent variables
ABSENT = 1 if landowner lived in county different than contracted land; = 0 otherwise.

ACRES = number of acres covered by contract.

CORN, OATS, SOYBEANS,
WHEAT = 1 if corn (oats, soybeans, wheat) was the major income-producing crop;

= 0 if not.

INPUTS = the number of inputs where the farmer pays all costs.

IRRIGATED = 1 if land is irrigated;=0ifdryland.

ROW CROP = 1 if row crop (corn, sugar beets, sugarcane soybeans, sorghum);

= 0 if not a row crop (e.g., wheat, oats, barley).

YEARS DURATION = number of years contract has been in place.

farmer's output share is 50 percent, then his input cost share is 50 percent. Heady, (1947)
argued that output shares must be equal to input shares for a cropshare contract to be efficient.
Prediction 5.1 contradicts Heady's contention and so do our data.

Dichotomous Rules for Input Shares

The Nebraska-South Dakota evidence is remarkably consistent with prediction 5.1. For the
three most common cropshare rules (50-50, 60-40, and 67-33),

q = 100 percent or q = s in

nearly all contracts (see table 5.4). 11 It is rare to find cases where

100 percent.
For instance, in 83 percent of 67-33 cropshare contracts, farmers and landowners share
equally in the cost of fertilizer; 13 percent of the contracts have the farmer pay all such
costs. Thus, these two input-sharing rules account for 96 percent of all cases. In general,
as table 5.4 shows, these two rules

q = s if q<

(q = s or q = 100 percent) combine for well over 90