Producer Protection Legislation and Termination Damages in the Presence of Contracting Frictions

Steven Wu ()

No 4373, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This study models producer protection legislation that would grant growers the right to claim damages (PPLD) if their contracts are prematurely terminated. In the absence of contracting frictions that prevent contractors from redesigning contracts to accommodate exogenous policy changes, PPLD would not be distortionary or redistributive. If contracting frictions exist, then PPLD would have efficiency and redistributive effects, though the direction and magnitude depends on the size of PPL damages vis-à-vis expected damages under existing contract law. This study clarifies the conditions under which PPLD would decrease efficiency and protect growers.

Keywords: producer protection legislation; moral hazard; agricultural policy; contracts; contract law (search for similar items in EconPapers)
JEL-codes: D82 D86 K12 Q12 Q18 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2009-08
New Economics Papers: this item is included in nep-cta and nep-reg
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Published - published in: American Journal of Agricultural Economics, 2010, 91 (1), 28 - 41

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Journal Article: Producer Protection Legislation and Termination Damages in the Presence of Contracting Frictions (2010)
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