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A theoretical and empirical study of agricultural contracts and organization based on the transaction cost framework.
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The Nature of the Farm
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The Nature of the Farm Contracts, Risk, and Organization in Agriculture
Douglas W. Allen and Dean Lueck
The MIT Press Cambridge, Massachusetts London, England
© 2002 Massachusetts Institute of Technology All rights reserved. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from the publisher. This book was set in Times Roman by Windfall Software (using ZzTEX) and was printed and bound in the United States of America. Library of Congress Cataloging-in-Publication Data Allen, Douglas W. The nature of the farm : contracts, risk, and organization in agriculture / Douglas W. Allen and Dean Lueck. p. cm. Includes bibliographical references (p. ). ISBN 0-262-12253-7 (hc. : alk. paper) 1. Farm management. 2. Agriculture—Economic aspects. 3. Sharecropping. 4. Risk management. 5. Contracts, Agricultural. I. Lueck, Dean. II. Title. S561 .A543 2003 640 .68—dc21
2002075125
Contents
Preface
vii
1
Introduction
1
2
Farming in North America
17
I
CONTRACTS AND THE TRANSACTION COST FRAMEWORK
31
3
The Simplicity of Agricultural Contracts
33
4
Choosing between Cropshare and Cash Rent Contracts
49
5
Sharing Inputs and Outputs
69
II
RISK SHARING AS AN ALTERNATIVE FRAMEWORK
93
6
Risk Sharing and the Choice of Contract
95
7
Ratchet Effects in Agricultural Cont