Hostname: page-component-78c5997874-ndw9j Total loading time: 0 Render date: 2024-11-20T04:19:20.431Z Has data issue: false hasContentIssue false
  • English
  • Français

Do Production Contracts Raise Farm Productivity? An Instrumental Variables Approach

Published online by Cambridge University Press:  15 September 2016

Nigel Key  and
William D. McBride
Get access

Abstract

Estimating how the use of production contracts affects farm productivity is difficult when unobservable factors are correlated with both the decision to contract and productivity. To account for potential selection bias, 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 United States. The instrumental variable method makes it credible to assert that the observed association is a causal relationship rather than simply a correlation.

Keywords

productivityproduction contractsinstrumental variablessample selection
Type
Contributed Papers
Information
Agricultural and Resource Economics Review , Volume 37 , Issue 2 , October 2008 , pp. 176 - 187
Copyright
Copyright © 2008 Northeastern Agricultural and Resource Economics Association 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Angrist, J., and Krueger, A. 2001. “Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments.” Journal of Economic Perspectives 15(4): 69–85.CrossRefGoogle Scholar
Barry, P., Roberts, B., Boehlje, M., and Baker, T. 1997. “Financing Capabilities of Independent Versus Contract Hog Production.” Journal of Agricultural Lending (pp. 8–14).Google Scholar
Gillespie, J., Davis, C., and Rahelizatovo, N. 2004. “An Evaluation of U. S. Hog Producer Preferences Toward Autonomy.” Journal of Agricultural and Applied Economics 36(3): 575–590.Google Scholar
Hennessy, D. 1996. “Information Asymmetry as a Reason for Food Industry Vertical Integration.” American Journal of Agricultural Economics 78(4): 1034–1043.Google Scholar
Kelejian, H. 1971. “Two-Stage Least Squares and Econometric Systems Linear in Parameters but Nonlinear in the Endogenous Variables.” Journal of the American Statistical Association 66(334): 373–374.Google Scholar
Key, N. 2004. “Agricultural Contracting and the Scale of Production.” Agricultural and Resource Economics Review 33(2): 255–271.Google Scholar
Key, N., and McBride, W. D. 2003. “Production Contracts and Productivity in the U. S. Hog Sector.” American Journal of Agricultural Economics 85(1): 121–133.Google Scholar
Key, N., and McBride, W. D. 2007. “The Changing Economics of U. S. Hog Production.” Economic Research Report No. 52, Economic Research Service, U. S. Department of Agriculture, Washington, D. C.Google Scholar
Key, N., McBride, W. D., and Mosheim, R. 2008. “Decomposition of Total Factor Productivity Change in the U. S. Hog Industry.” Journal of Agricultural and Applied Economics 40(1) (forthcoming).Google Scholar
Knoeber, C., and Thurman, W. 1995. ‘“Don't Count Your Chickens …’: Risk and Risk Shifting in the Broiler Industry.” American Journal of Agricultural Economics 77(3): 486–496.Google Scholar
Leung, S., and Yu, S. 1996. “On the Choice between Sample Selection and Two-Part Models.” Journal of Econometrics 72(1/2): 197–229.Google Scholar
Little, R.J.A., and Rubin, D. B. 1987. Statistical Analysis with Missing Data. New York: John Wiley and Sons.Google Scholar
MacDonald, J., Perry, J., Ahearn, M., Banker, D., Chambers, W., Dimitri, C., Key, N., Nelson, K., and Southard, L. 2004. “Contracts, Markets, and Prices: Organizing the Production and Use of Agricultural Commodities.” Agricultural Economic Report No. 837, Economic Research Service, U. S. Department of Agriculture, Washington, D. C.Google Scholar
Martin, L.A. 1997. “Production Contracts, Risk Shifting, and Relative Performance Contracts in the Pork Industry.” Journal of Agricultural and Applied Economics 29(2): 267–278.Google Scholar
Martinez, S., Smith, K., and Zering, K. 1998. “Analysis of Changing Methods of Vertical Coordination in the Pork Industry.” Journal of Agricultural and Applied Economics 30(2): 301–311.Google Scholar
McBride, W.D., and Key, N. 2003. “Economic and Structural Relationships in U. S. Hog Production.” Agricultural Economic report. No. 818, Economic Research Service, U. S. Department of Agriculture, Washington, D. C.Google Scholar
Paul, C. J. M., Nehring, R., and Banker, D. 2004. “Productivity, Economies, and Efficiency in U. S. Agriculture: A Look at Contracts.” American Journal of Agricultural Economics 86(5): 1308–1314.Google Scholar
Puhani, P. 2000. “The Heckman Correction for Sample Selection Bias and Its Critique.” Journal of Economic Surveys 14(1): 53–68.Google Scholar
Rhodes, V. J. 1995. “The Industrialization of Hog Production.” Review of Agricultural Economics 17(2): 107–118.Google Scholar
U. S. Department of Agriculture. Various Issues. “Hogs and Pigs: Farms, Land in Farms, and Livestock Operations.” National Agricultural Statistics Service, U. S. Department of Agriculture, Washington, D. C. Google Scholar
Zuehlke, T. W., and Zeman, A. R. 1991. “A Comparison of Two-Stage Estimators of Censored Regression Models.” The Review of Economics and Statistics 73(1): 185–188.Google Scholar