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On the Efficacy of Contractual Provisions for Processing Tomatoes

Brent Hueth () and Ethan Ligon ()

No 21990, 2003 Annual meeting, July 27-30, Montreal, Canada from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: This paper uses extensive data on production outcomes for processing tomato growers in California to examine the efficacy of explicit incentives observed in grower-processor contracts. Our data include all deliveries of tomatoes to some 51 processors over a period of 7 years in which at least 65 unique types of contracts are employed. Results indicate that incentives account for a significant proportion of observed variation in production outcomes, and that complementarities across different sorts of "incentive instruments" play a prominent role in contract design. Although explicit incentives explain a substantial portion of the variation in production outcomes relative to that which could be explained by incentives (as captured by processor/year fixed effects), there remains considerable variation which might be accounted for by unobserved or implicit incentives. Finally, we control for a quite exhaustive set of factors other than incentive provisions that might conceivably affect expected production outcomes, yet are still left with a substantial amount of unexplained variation.

Keywords: Crop; Production/Industries (search for similar items in EconPapers)
Pages: 25
Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea03:21990

DOI: 10.22004/ag.econ.21990

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