The Role of Risk in Farmland Contract Choices
By: Arnold, Chelsea; Yu, Jisang; Taylor, Mykel; Palm-Forster, Leah H.; Banerjee, Simanti
Arnold, Chelsea; Yu, Jisang; Taylor, Mykel; Palm-Forster, Leah H.; Banerjee, Simanti, The Role of Risk in Farmland Contract Choices, Journal of Agricultural and Resource Economics, Volume 48, Issue 2, May 2023, Pages 398-411
Understanding the role of risk in farmland leasing contract choices is important to assess the welfare consequences of farm policies or environmental changes that affect production risk. We use a unique dataset of landowners and tenants in Kansas to examine the role of risk in their farmland leasing contract choices. We find that greater production risk and more risk-averse landowners encourage fixed cash rent contracts. As many variables can potentially affect contract choices, we use a penalized regression to show that the inclusion of relationship variables leads to little change in the main results.