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Producer Protection Legislation and Termination Damages in the Presence of Contracting Frictions

Author

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  • Wu, Steven Y.

    (Purdue University)

Abstract

This study models producer protection legislation that would grant growers the right to claim damages (PPLD) if their contracts are prematurely terminated. In the absence of contracting frictions that prevent contractors from redesigning contracts to accommodate exogenous policy changes, PPLD would not be distortionary or redistributive. If contracting frictions exist, then PPLD would have efficiency and redistributive effects, though the direction and magnitude depends on the size of PPL damages vis-à-vis expected damages under existing contract law. This study clarifies the conditions under which PPLD would decrease efficiency and protect growers.

Suggested Citation

  • Wu, Steven Y., 2009. "Producer Protection Legislation and Termination Damages in the Presence of Contracting Frictions," IZA Discussion Papers 4373, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp4373
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    References listed on IDEAS

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    1. Steven Y. Wu, 2010. "Producer Protection Legislation and Termination Damages in the Presence of Contracting Frictions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(1), pages 28-41.
    2. Lewin-Solomons, S., 2000. "Asset Specificity and Hold-up in Franchising and Grower Contracts: A Theoretical Rationale for Government Regulation?," Cambridge Working Papers in Economics 0013, Faculty of Economics, University of Cambridge.
    3. Tomislav Vukina & Porametr Leegomonchai, 2006. "Oligopsony Power, Asset Specificity, and Hold-Up: Evidence from the Broiler Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(3), pages 589-605.
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    Cited by:

    1. Steven Y. Wu, 2010. "Producer Protection Legislation and Termination Damages in the Presence of Contracting Frictions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(1), pages 28-41.
    2. Wu, Steven Y., 2013. "Adapting Contract Theory to Fit Contract Farming," 2014 Allied Social Sciences Association (ASSA) Annual Meeting, January 3-5, 2014, Philadelphia, PA 161894, Agricultural and Applied Economics Association.

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    More about this item

    Keywords

    producer protection legislation; moral hazard; agricultural policy; contracts; contract law;
    All these keywords.

    JEL classification:

    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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