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Economic consequences of collaborative arrangements in the agricultural firm

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  • Larsén, Karin

Abstract

This thesis consists of five papers that analyse various aspects of contracts in agriculture. Four papers concern collaborative arrangements between farmers. Different types of gains from partnerships are analysed, such as gains from risk-sharing and diversification, biological effects, cost savings on machinery and labour and improved farm efficiency. Also a potential cost of partnerships – the risk of opportunistic behaviour among partners – is analysed. The objective of the first paper is to analyse if there are incentives for a partnership between a specialised piglet and fattening pig producer (vertical co-ordinated integration). Using data for average Swedish pig producers, it is shown that improved production results in vertically coordinated production as well as risk reduction create incentives for specialised piglet and fattening pig producers to collaborate. The second paper analyses the incentives for collaboration between a crop and a dairy farm by applying a model of a share contract. This study uses data from two pair of case farms representing crop and dairy farms of various sizes. The results suggest that gains from risk sharing, diversification, improved crop rotation and machinery- and labour-sharing can be substantial in a partnership. Paper IV analyses farmers' decision to engage in partnership arrangements, involving machinery- and labour-sharing with other farmers. A theoretical framework is used to illustrate that any incentive to act opportunistically is deterred by presence of social norms. The empirical analysis, based on a questionnaire to Swedish farmers in combination with FADN-variables, suggests that moral hazard problems are perceived to be relatively limited in existing partnerships, which are characterized by a considerable a degree of trust and good social relations. In the last paper, the impact of machinery- and labour-sharing arrangements on farm efficiency is analysed using the same data sources as in Paper IV. The results suggest that average efficiency is greater among the partnership farms, compared with the non-partnership farms. Moreover, partnership farms with the most extensive collaboration, i.e. that share all machinery, display the highest average efficiency scores. One paper deals with farmers' participation in agri-environmental payment programs. In that study, farmers' decision to participate in agri-environmental payment programs is analysed, as well as the impact of program participation on economic performance. It is found that larger farms are more likely to be program participants and that program participation has a positive impact on farm performance (profitability). Methodological approaches used in the thesis include mathematical programming considering risk, Data Envelopment Analysis and econometrics.

Suggested Citation

  • Larsén, Karin, 2008. "Economic consequences of collaborative arrangements in the agricultural firm," Department of Economics publications 1740, Swedish University of Agricultural Sciences, Department of Economics.
  • Handle: RePEc:sua:ekonwp:1740
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