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Producer Protection Legislation and Termination Damages in the Presence of Contracting Frictions

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Author Info
Wu, Steven Y. () (Purdue University)
Abstract

This study models producer protection legislation that would grant growers the right to claim damages (PPLD) if their contracts are prematurely terminated. In the absence of contracting frictions that prevent contractors from redesigning contracts to accommodate exogenous policy changes, PPLD would not be distortionary or redistributive. If contracting frictions exist, then PPLD would have efficiency and redistributive effects, though the direction and magnitude depends on the size of PPL damages vis-à-vis expected damages under existing contract law. This study clarifies the conditions under which PPLD would decrease efficiency and protect growers.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4373.

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Date of creation: Aug 2009
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Publication status: forthcoming in: American Journal of Agricultural Economics
Handle: RePEc:iza:izadps:dp4373

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Related research
Keywords: agricultural policy; moral hazard; producer protection legislation; contracts; contract law;

Find related papers by JEL classification:
Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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This page was last updated on 2009-12-7.

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