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Effect Of Risk Perspective On Fertilizer Choice By Sharecroppers

Listed author(s):
  • Paudel, Krishna P.
  • Lohr, Luanne
  • Martin, Neil R., Jr.

Peanut and corn are two major crops in the tri-state area of the Southeast US, an area encompassing North Florida, Southwest Georgia, and Southeast Alabama. Sharecroppers in this region apply higher amount of input in crop production than the average farmers. We analyzed the behavior of sharecroppers in this region with regard to their fertilizer application decisions. Two hypotheses were formulated and tested based on sharecroppers' fertilizer application decisions: one assuming that sharecroppers are risk averse farmers and the other assuming that sharecroppers are regret minimizers. Our results show that a sharecropper uses different fertilizer treatments when minimizing risk depending on risk perspective and desired income. Sharecroppers who apply more fertilizer to obtain a desired level of income are regret minimizers where as sharecroppers who apply relatively low fertilizer are risk minimizer. At the same desired level of income, a regret minimizer farmer would apply a higher amount of fertilizer than the risk averse farmers. Our analysis revealed that sharecroppers in the Southeast US are regret minimizers as they apply a higher amount of fertilizer than an average farmer on the major crops grown in the region. The result of this study also confirms the result of a previous study in the region which reported that sharecroppers in the region are over capitalized and apply more fertilizer than average farmers.

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Paper provided by Auburn University, Department of Agricultural Economics and Rural Sociology in its series Series Reports with number 23814.

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Date of creation: 2000
Handle: RePEc:ags:sraubu:23814
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  1. Douglas W. Allen & Dean Lueck, 1993. "Transaction Costs and the Design of Cropshare Contracts," RAND Journal of Economics, The RAND Corporation, vol. 24(1), pages 78-100, Spring.
  2. P. B. R. Hazell, 1971. "A Linear Alternative to Quadratic and Semivariance Programming for Farm Planning under Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 53(1), pages 53-62.
  3. Daniel Arce, 1995. "Social norms and core outcomes in a sharecropping economy," Journal of Economics, Springer, vol. 61(2), pages 175-183, June.
  4. Baron, Donald, 1982. "The Effects of Tenancy and Risk on Cropping Patterns: A Mathematical Programming Analysis," Agricultural Economics Research, United States Department of Agriculture, Economic Research Service, issue 4.
  5. Tek-Ann Chew, 1993. "The Transactional Framework of Sharecropping: Further Implications," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 41(2), pages 209-221, 07.
  6. 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.
  7. B. Curtis Eaves, 1971. "On Quadratic Programming," Management Science, INFORMS, vol. 17(11), pages 698-711, July.
  8. Paudel, Krishna P. & Lohr, Luanne & Martin, Neil R., 1998. "Optimal input cost sharing for tenants: Implications for negotiating efficiency," Agricultural Systems, Elsevier, vol. 57(1), pages 1-11, May.
  9. Eswaran, Mukesh & Kotwal, Ashok, 1985. "A Theory of Contractual Structure in Agriculture," American Economic Review, American Economic Association, vol. 75(3), pages 352-367, June.
  10. Braverman, Avishay & Stiglitz, Joseph E., 1986. "Landlords, tenants and technological innovations," Journal of Development Economics, Elsevier, vol. 23(2), pages 313-332, October.
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