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Contract duration and the division of labor in agricultural land leases

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  • Yoder, Jonathan
  • Hossain, Ishrat
  • Epplin, Francis
  • Doye, Damona

Abstract

Short-term contracts provide weak incentives for durable input investment if post-contract asset transfer is difficult. Our model shows that when both agents provide inputs, optimal contract length balances the weak incentives of one agent against the other's. This perspective broadens the existing contract duration literature, which emphasizes the tradeoff between risk sharing and contracting costs. We develop hypotheses and test them based on private grazing contracts from the Southern Great Plains. We find broad support for the implications of our model. For example, landowners provide durable land-specific inputs more often under annual than multi-year contracts.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 65 (2008)
Issue (Month): 3-4 (March)
Pages: 714-733

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Handle: RePEc:eee:jeborg:v:65:y:2008:i:3-4:p:714-733

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Cited by:
  1. Vondolia, Godwin Kofi & Eggert, Hakan & Navrud, Stale & Stage, Jesper, 2011. "What Do Respondents Bring to Contingent Valuation? A Comparison of Monetary and Labor Payment Vehicles," Discussion Papers dp-11-13-efd, Resources For the Future.
  2. Vondolia, Godwin K., 2011. "What do respondents bring into contingent valuation? A comparison of monetary and labour payment vehicles," Working Papers in Economics 508, University of Gothenburg, Department of Economics.

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