An Empirical Investigation of the Linkages between Government Payments and Farmland Leasing Arrangements

This article investigates the impacts of decoupled and coupled program payments on farmland rental contract choices for a subset of U.S. crop farms using a principal-agent model. We consider cash and share contracts as well as hybrid contracts, which represent an increasingly prominent feature of U.S. agriculture. The conceptual framework suggests that restrictions on payments between contracting parties are ineffective and induce an offsetting contractual rearrangement. Empirical results from a multinomial logit model confirm that government support programs have large, significant effects on contract choices and that these effects vary by types of programs.