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Contract Duration and the Division of Labor in Agricultural Land Leases

Author

Listed:
  • Jonathan Yoder
  • Ishrat Hossain
  • Francis Eppin
  • Damona Doye

    (School of Economic Sciences, Washington State University)

Abstract

Short-term contracts provide weak incentives for durable input investment if post-contract asset transfer is difficult. Our model shows that when both agents provide inputs, optimal contract length balances weak incentives of one agent against the other. This perspective broadens the existing contract duration literature, which emphasizes the tradeoff between risk sharing and contract costs. We develop hypotheses and test them based on private grazing contracts from the Southern Great Plains. We find broad support for the implications of our model. For example, landowners provide durable land-specific inputs more often under annual versus multiyear contracts.

Suggested Citation

  • Jonathan Yoder & Ishrat Hossain & Francis Eppin & Damona Doye, 2005. "Contract Duration and the Division of Labor in Agricultural Land Leases," Working Papers 2005-6, School of Economic Sciences, Washington State University.
    • Handle: RePEc:wsu:wpaper:yoder-3
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    2. Awudu Abdulai & Renan Goetz, 2014. "Time-Related Characteristics of Tenancy Contracts and Investment in Soil Conservation Practices," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 59(1), pages 87-109, September.
    3. Du Xiaodong & Hennessy David & Edwards William A., 2008. "Does a Rising Biofuels Tide Raise All Boats? A Study of Cash Rent Determinants for Iowa Farmland under Hay and Pasture," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 6(2), pages 1-25, December.
    4. Godwin Kofi Vondolia & Håkan Eggert & Ståle Navrud & Jesper Stage, 2014. "What do respondents bring to contingent valuation? A comparison of monetary and labour payment vehicles," Journal of Environmental Economics and Policy, Taylor & Francis Journals, vol. 3(3), pages 253-267, November.
    5. Weiguo Fan & Yuheng Zhang & Nan Chen & Wanqing Nie, 2024. "A Review of Rural Land Capitalization: Current Status and Further Research," Land, MDPI, vol. 13(3), pages 1-22, March.
    6. Godwin Kofi Vondolia & Håkan Eggert & Ståle Navrud & Jesper Stage, 2014. "What do respondents bring to contingent valuation? A comparison of monetary and labour payment vehicles," Journal of Environmental Economics and Policy, Taylor & Francis Journals, vol. 3(3), pages 253-267, November.
    7. Tang, Liang & Ma, Xianlei & Zhou, Yuepeng & Shi, Xiaoping & Ma, Jia, 2019. "Social relations, public interventions and land rent deviation: Evidence from Jiangsu Province in China," Land Use Policy, Elsevier, vol. 86(C), pages 406-420.
    8. Adewale Henry Adenuga & Claire Jack & Ronan McCarry, 2021. "The Case for Long-Term Land Leasing: A Review of the Empirical Literature," Land, MDPI, vol. 10(3), pages 1-21, March.
    9. Shi, X. & Zhou, Y. & Heerink, N. & Ma, X., 2018. "The effect of land tenure governance on grain efficiency: Evidence from three provinces in eastern China," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277477, International Association of Agricultural Economists.
    10. Choi, Jiseon & Jodlowski, Margaret C., 2022. "Tenure Status and Land Investment in South Korea," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322476, Agricultural and Applied Economics Association.
    11. Lestage, Romain & Li, Youping, 2022. "Input price discrimination can encourage downstream investment and increase welfare," Economics Letters, Elsevier, vol. 217(C).
    12. Jan K. Brueckner & Stuart S. Rosenthal, 2022. "Tenant Riskiness, Contract Length, and the Term Structure of Commercial Leases," CESifo Working Paper Series 10189, CESifo.
    13. Kyösti Pietola & Sami Myyrä & Eija Pouta, 2011. "The Effects of Changes in Capital Gains Taxes on Land Sales: Empirical Evidence from Finland," Land Economics, University of Wisconsin Press, vol. 87(4), pages 582-594.
    14. Goetz, Renan & Yatsenko, Yuri & Hritonenko, Natali & Xabadia, Angels & Abdulai, Awudu, 2019. "The dynamics of productive assets, contract duration and holdup," Mathematical Social Sciences, Elsevier, vol. 97(C), pages 24-37.

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    More about this item

    Keywords

    land lease contracts; moral hazard; contract duration; division of labor.;
    All these keywords.

    JEL classification:

    • J43 - Labor and Demographic Economics - - Particular Labor Markets - - - Agricultural Labor Markets
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment

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