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Production Contracts And Farm Productivity: Examining The Link Using Instrumental Variables

Author

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  • Key, Nigel D.
  • McBride, William D.

Abstract

Estimating how production contracts affect farm productivity is difficult because the decision to use a contract is endogenous to other decisions affecting productivity. This study uses the local availability of production contracts as an instrument for whether a farm uses a contract in order to estimate the impact of contract use on total factor productivity. Results indicate that use of a production contract is associated with a large increase in productivity for feeder-to-finish hog farms in the U.S. The instrumental variable method makes it credible to assert that the observed association is a causal relationship rather than simply a correlation.

Suggested Citation

  • Key, Nigel D. & McBride, William D., 2007. "Production Contracts And Farm Productivity: Examining The Link Using Instrumental Variables," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon 9716, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea07:9716
    DOI: 10.22004/ag.econ.9716
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    Keywords

    Farm Management; Productivity Analysis;

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