PRODUCTION CONTRACTS AND FARM PRODUCTIVITY: EXAMINING THE LINK USING INSTRUMENTAL VARIABLES

Nigel Key and William McBride

No 9716, 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: Estimating how production contracts affect farm productivity is difficult because the decision to use a contract is endogenous to other decisions affecting productivity. 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 U.S. The instrumental variable method makes it credible to assert that the observed association is a causal relationship rather than simply a correlation.

Keywords: Farm Management; Productivity Analysis (search for similar items in EconPapers)
Pages: 20
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea07:9716

DOI: 10.22004/ag.econ.9716

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