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Contract and Exit Decisions in Finisher Hog Production


  • Fengxia Dong
  • David A. Hennessy
  • Helen H. Jensen


Finisher hog production in North America has shifted toward larger units and contract format since 1990. Exit among independent growers has been high. We develop a model showing that growers with any of three efficiency attributes (lower innate hazard of exit, variable costs, or contract adoption costs) are more likely to contract, produce more, and expend more on business protection. Using 2004 Agricultural Resource Management Survey data, a recursive bivariate probit model confirms that contracting producers are less likely to exit. Specialization increases the probability of contracting. Education, nonfarm income, and older production facilities are significant in increasing expected exit. Copyright 2010, Oxford University Press.

Suggested Citation

  • Fengxia Dong & David A. Hennessy & Helen H. Jensen, 2010. "Contract and Exit Decisions in Finisher Hog Production," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(3), pages 667-684.
  • Handle: RePEc:oup:ajagec:v:92:y:2010:i:3:p:667-684

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    References listed on IDEAS

    1. Väre, Minna & Heshmati, Almas, 2004. "Perspectives on the Early Retirement Decisions of Farming Couples," IZA Discussion Papers 1342, Institute for the Study of Labor (IZA).
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    Cited by:

    1. Li, Na & Vyn, Richard & McEwan, Ken, 2015. "To Invest or to Sell? The Impacts of Ontario's Greenbelt on Farm Exit and Investment Decisions," 2015 Conference, August 9-14, 2015, Milan, Italy 212049, International Association of Agricultural Economists.
    2. Key, Nigel, 2013. "Production Contracts and Farm Business Growth and Survival," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 45(02), pages 277-293, May.
    3. Kuo-Liang Chang & George Langelett & Andrew Waugh, 2011. "Health, Health Insurance, and Decision to Exit from Farming," Journal of Family and Economic Issues, Springer, vol. 32(2), pages 356-372, June.
    4. Dong, Fengxia & Hennessy, David A. & Jensen, Helen H., 2013. "Size, Productivity and Exit Decisions in Dairy Farms," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150339, Agricultural and Applied Economics Association.
    5. Saint-Cyr, Legrand D. F., 2016. "Accounting for farm heterogeneity in the assessment of agricultural policy impacts on structural change," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 235778, Agricultural and Applied Economics Association.

    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • J43 - Labor and Demographic Economics - - Particular Labor Markets - - - Agricultural Labor Markets


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