Nature of the Farm: Revisited

34 Pages Posted: 28 Sep 2013 Last revised: 27 May 2016

See all articles by Matthew S. Elliott

Matthew S. Elliott

University of Missouri at Columbia - Agricultural and Applied Economics

Harvey S. James, Jr.

University of Missouri at Columbia - Division of Applied Social Sciences

Date Written: May 1, 2016

Abstract

We empirically test the effect of separating ownership and control and its interaction with farmer effort on farm success using USDA-ARMS data. We use a two-stage least squares approach and instrumental variables that proxy participation constraints to binding incentive contracts. We find the interaction of increasing separated ownership and control organization and farmer effort is significantly positive for farm success in grain farms, but insignificant for farm success for livestock farms. Our findings are consistent with the hypotheses described by Allen and Lueck (1998). However, our model predicts that separated ownership and control farms are likely to have superior farm success despite greater exogenous uncertainty and agency costs.

Keywords: agency costs, organization, farm, transaction costs, corporations, ownership, control

JEL Classification: L2

Suggested Citation

Elliott, Matthew S. and James, Harvey S., Nature of the Farm: Revisited (May 1, 2016). Available at SSRN: https://ssrn.com/abstract=2330779 or http://dx.doi.org/10.2139/ssrn.2330779

Matthew S. Elliott (Contact Author)

University of Missouri at Columbia - Agricultural and Applied Economics ( email )

Columbia, MO 65211
United States

Harvey S. James

University of Missouri at Columbia - Division of Applied Social Sciences ( email )

Columbia, MO
United States
573-884-9682 (Phone)

HOME PAGE: http://https://hsjames2.wordpress.com

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