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How Cropland Contract Type And Term Decisions Are Made: Evidence From An Arkansas Tenant Survey

  • Bierlen, Ralph W.
  • Parsch, Lucas D.
  • Dixon, Bruce L.
Registered author(s):

    This study examines land contract decision-making with the use of an eastern Arkansas data set. Estimated probit models used to test contract choice hypotheses support a credit constraint hypothesis, indicating that contract choice is based on: 1) the tenant's financial position and operating expense levels, 2) the size of the operation; 3) alternative uses of agricultural land; and 4) the supply of contracted land. Results indicate limited support for the agency problem hypothesis and reject the risk aversion and farmers managerial ability hypotheses. Regression equations used to select lease term hypotheses indicate that cash rent levels are sensitive to land quality, supply of contract acres, irrigation, and crop produced. Tenant shares of the crop and variable costs are less sensitive to land quality than cash rents. Other variables that influence tenant shares of the crop and variable costs include tenant/landlord social capital, the supply of contracted acres, and crop selection.

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    File URL: http://purl.umn.edu/34353
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    Article provided by International Food and Agribusiness Management Association (IAMA) in its journal International Food and Agribusiness Management Review.

    Volume (Year): 02 (1999)
    Issue (Month): 01 ()
    Pages:

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    Handle: RePEc:ags:ifaamr:34353
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    1. Otsuka, Keijiro & Hayami, Yujiro, 1988. "Theories of Share Tenancy: A Critical Survey," Economic Development and Cultural Change, University of Chicago Press, vol. 37(1), pages 31-68, October.
    2. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
    3. D.J. Brown & J.H. Atkinson, 1981. "Cash and Share Renting: An Empirical Test of the Link Between Entrepreneurial Ability and Contractual Choice," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 296-299, Spring.
    4. John R. Graham & Michael L. Lemmon & James S. Schallheim, 1998. "Debt, Leases, Taxes, and the Endogeneity of Corporate Tax Status," Journal of Finance, American Finance Association, vol. 53(1), pages 131-162, 02.
    5. Mike Adams & Philip Hardwick, 1998. "Determinants of the leasing decision in United Kingdom listed companies," Applied Financial Economics, Taylor & Francis Journals, vol. 8(5), pages 487-494.
    6. Allen, Douglas & Lueck, Dean, 1992. "Contract Choice in Modern Agriculture: Cash Rent versus Cropshare," Journal of Law and Economics, University of Chicago Press, vol. 35(2), pages 397-426, October.
    7. Laurie Baker & Paul J. Thomassin, 1991. "Financing New Farm Entrants: The Long-term Leasing Option," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 39(2), pages 255-269, 07.
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