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Searching For Ratchet Effects In Agricultural Contracts

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Author Info
Allen, Douglas W.
Lueck, Dean
Abstract

In a dynamic contracting environment, increasing standards over time in light of past performance is known as the ratchet effect. Despite the recent theoretical attention given to the ratchet effect, models that include these effects have not been empirically tested against contract data. In this study, we use farm-level data on modern Great Plains agricultural cash rent and cropshare contracts to test for the presence of ratchet effects in the context of a principal-agent model with moral hazard. We find limited evidence for the ratchet effect within share contracts, and no evidence that it is important for the choice of contract between cash rent and cropshare.

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File URL: http://purl.umn.edu/30796
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Publisher Info
Article provided by Western Agricultural Economics Association in its journal Journal of Agricultural and Resource Economics.

Volume (Year): 24 (1999)
Issue (Month): 02 (December)
Pages:
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Handle: RePEc:ags:jlaare:30796

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Related research
Keywords: Agribusiness;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Meyer, Margaret A & Vickers, John, 1995. "Performance Comparisons and Dynamic Incentives," CEPR Discussion Papers 1107, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. Shelanski, Howard A & Klein, Peter G, 1995. "Empirical Research in Transaction Cost Economics: A Review and Assessment," Journal of Law, Economics and Organization, Oxford University Press, vol. 11(2), pages 335-61, October.
  3. Allen, Douglas W & Lueck, Dean, 1992. "The "Back Forty" on a Handshake: Specific Assets, Reputation, and the Structure of Farmland Contracts," Journal of Law, Economics and Organization, Oxford University Press, vol. 8(2), pages 366-76, April.
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Charness, Gary & Kuhn, Peter J. & Villeval, Marie-Claire, 2008. "Competition and the Ratchet Effect," IZA Discussion Papers 3784, Institute for the Study of Labor (IZA). [Downloadable!]
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  2. Roe, Brian & Wu, Steven, 2003. "The Welfare Effects Of Banning Tournaments When Commitment Is Impossible: Some Results From The Broiler Sector," 2003 Annual meeting, July 27-30, Montreal, Canada 22151, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
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