Agriculture Reference
In-Depth Information
Table 5.5
The relationship between cropshare rules and input share rules
Input
Rule
Cropshare mean
t-value (df )
Two-tailed probability
CHEMICAL APPLICATION
q
=
s
0.5800
4.45
0.0001
q
=
1
0.6013
(1577)
DRYING
q
=
s
0.5764
6.52
0.0001
q
=
1
0.6061
(1582)
FERTILIZER
q
=
s
0.5908
7.33
0.0001
q
=
1
0.6311
(1501)
HARVEST
q
=
s
0.5364
8.46
0.0001
q
=
1
0.6006
(1611)
HERBICIDE
q
=
s
0.5771
10.36
0.0001
q
=
1
0.6215
(1554)
INSECTICIDE
q
=
s
0.5766
9.52
0.0001
q
=
1
0.6181
(1561)
ENERGY
q
=
s
0.5505
10.03
0.0001
q
=
1
0.6062
(1595)
SEED
q
=
s
0.5240
20.15
0.0001
q
=
1
0.6179
(1600)
Determinants of Input Shares
Prediction 5.2 says that output shares will be higher for pure cropshare contracts
(q
=
1
)
than
for input-output cropshare contracts
. The input-output cropshare contract results in
the use of variable inputs at the “optimal” level (
(q
=
s)
k
=
k
∗
). We test this
prediction by comparing the farmer's mean output share for pure cropshare contracts with
the mean share for input-output cropshare contracts. Table 5.5 shows the mean output share
to the farmer for each input according to whether input costs were shared
s
=
q
implies that
(q
=
s)
or fully
borne by the farmer
. For each input, the farmer's mean output share is significantly
higher (averaging 61% versus 56%) when the farmer bears all the input costs
(q
=
1
)
(q
=
1
)
than
. This evidence further supports the general
idea that input measurement costs are an important determinant of the details of agricultural
contracts. If there were no such costs
when he shares them with the landowner
(q
=
s)
(m
=
0
)
, input sharing would always occur and in the
.
12
Prediction 5.5 says that when input measurement costs are low, the input-output cropshare
contract is more likely to be chosen because it comes closer to the first-best level of input
use. One can distinguish cases in which input division costs are expected to be low, and one
can distinguish between various inputs. Inputs such as fertilizer and seed are purchased in
the market. Other inputs, such as harvesting, are not as routinely purchased, but more often
same proportion as output sharing
(q
=
s)
