Effect of risk and incentives on contracts: The case of farm operators in Iowa

Abstract

AbstractLongitudinal data on Iowa landowner–operator contracts are used to examine how the mean, variance, and skewness of expected farmland returns affected contract terms from 2008 to 2019. To control for unobserved operator risk preferences and ability as a fixed effect, the sample includes operators with multiple contracts. Our empirical work shows that farmland with lower variance is more likely to be rented for cash, whereas land with highly variable returns is more likely to be custom contracted. [EconLit Citations: L14, Q15]