Recent Research Papers
"Do Income Support Programs Impact Producer Hedging Decisions? Evidence from a Cross-Country Comparative " (with Andrea E. Woolverton) CORI Working Paper #2009-04 (revised May 2009)
This paper provides a unique perspective to the question of why U.S. producers’ hedging practices are not consistent with the price-risk management literature. We conduct a formal test of income support program impacts with unique producer survey data from South Africa and the United States, which have different producer income support policies. We find that producing in a supported environment decreases hedging for pre-planting and pre-harvest price levels by approximately 30 and 20 percent, respectively. These results suggest that South African price-risk management directly affects production decisions; planting and PRM decisions appear to be made simultaneously, whereas U.S. producers [in an average year] plant first then manage price risk as seasonal prices evolve. This study raises issues for further inquiry regarding both comparative agricultural lending practices and the relative costs of price-risk management (hedging) tools across countries.
"Contracting for Consistency: Hog Quality and the Use of Marketing Contracts" (with Jong-Ick Jang) CORI Working Paper #2009-02 (revised March 2009)
Despite the dramatic change in the organization of the US hog industry over the past two decades, the existing literature offers little insight into the decision by pork packers to use long-term marketing contracts, which represent the dominant form of hog procurement transactions. Existing studies focus instead on the efficacy of incentive mechanisms for which contracts are neither necessary nor sufficient, on hog producers' motivations for accepting contracts, or on packers' use of production contracts or vertical integration, which represent a relatively small share of slaughtered hogs. This paper offers a framework to explain pork packers' adoption of marketing contracts based on packers' downstream strategic market positioning and their resulting demands for specific hog quality attributes. Based on an analysis of hog procurement contract terms and of survey data related to packers' procurement practices, we provide support for the argument that packers' use of contracts is driven by issues of measurement costs and demand for intertemporal consistency of quality rather than by technological and market structure factors associated with asset specificity arguments.
"New Institutional Econometrics: The Case of Contracting and Organizations Research" Chapter 6 in Eric Brousseau and Jean-Michel Glachant, eds., New Institutional Economics: A Textbook Cambridge: Cambridge University Press (2008): 122-141
New Institutional Economics is characterized by its real-word orientation and empirical focus. Nowhere is this broader scope more evident than in microeconomic theories of firms and markets. NIE has led researchers not only to crack open the black box of production known as the firm, but also the market itself, examining the structures of individual transactions and their implications for firm and market performance. The result is a burgeoning field of research on the causes and consequences of different modes for governing the allocation and coordination of resources in an economy. The broad array of questions addressed and data employed require NIE researchers to be flexible in their choice of econometric methods. The purpose of this paper is to provide an overview of econometric techniques appropriate to NIE research and some of the empirical and theoretical challenges facing scholars in this field.
"Markets, Contracts or Integration? The Adoption, Diffusion and Evolution of Organizational Form" (with Harvey S. James, Jr., and Peter G. Klein) (revised April 2007)
The rise of contract farming and vertical integration is one of the most important changes in modern agriculture. Yet the adoption and diffusion of these new forms of organization has varied widely across regions, commodities, and farm types. Transaction cost and other modern theories of the firm help explain the advantages of contracting and integration over reliance on spot markets and commodity brokers. However, these theories do not address the variation in adoption rates of new organizational forms. This paper lays out a more dynamic framework for understanding the evolution of organizational practices in U.S. agriculture, drawing on theories of the diffusion of technology and organizational complementarities. Using recent trends as stylized facts we argue that the agrifood sector is characterized by strong complementarities and that identifying and describing these complementarities more fully sheds considerable light on the organizational structure of agricultural production. We illustrate our arguments with case studies from the oilseed, poultry, and hog industries.
"Farmer Trust in Producer- and Investor-Owned Firms: Evidence from Missouri Corn and Soybean Producers" (with Harvey S. James, Jr.) Agribusiness: An International Journal, 22 no. 1 (2006): 135-153
We examine whether cooperatives are characterized by greater trust than investor-owned firms. We survey 2000 Missouri corn and soybean farmers and find that trust and farmer perceptions of honesty and competence are higher in cooperatives than in investor-owned firms and that trust is a significant factor explaining the choice of farmers to market to cooperatives rather than investor-owned firms. Interestingly, we find that trust is more significant in producers' decisions for marketing soybeans than for corn.
"Property Right and Organizational Characteristics of Producer-Owned Firms and Organizational Trust" (with Harvey S. James, Jr.) Annals of Public and Cooperative Economics, 76 no. 4 (2005): 545-580
We examine how organizational characteristics of producer-owned firms are correlated with the level of perceived trust among cooperative members, using survey data from a sample of U.S. agricultural cooperatives. Our results indicate trust is correlated with property right and organizational structures previously identified in the literature as significant for cooperative performance. We find that the norm of equality and the homogeneity of member interests are key correlates of organizational trust in producer-owned firms. We also find that some property right structures that improve organizational trust are counterproductive for member investment incentives.
"Politics, Economics and the Regulation of Direct Interstate Shipping in the Wine Industry" (with Gina Riekhof) American Journal of Agricultural Economics, 86 (2004): 439-452
In 1986, California passed legislation restricting the direct importation of wine from another state by California residents unless the originating state allowed direct shipment from California wineries to residents in that state. The result has been a patchwork of direct shipment regulations across states. We examine how various economic and public interest factors affect the likelihood that a state adopts a change in its direct shipment regulation and the nature of that change. Our results suggest that private and public sector economic considerations lie at the root of direct shipment regulations in the wine industry.
"Who's Monitoring the Monitor? Do Outside Directors Protect Shareholders' Interests?" (with Eric Helland) The Financial Review, 40 no. 2 (2005): 155-172
The corporate governance literature is rich with empirical tests of the relation between board composition and firm performance. We consider the effect of board composition on a different measure of performance, the probability a firm will be sued by shareholders. We find firms that are defendants in securities litigation have higher proportions of insiders and of gray directors and have smaller boards than a matched group of firms that are not sued, even when controlling for firm value and industry. The results suggest that boards with higher proportions of outside directors do a better job of monitoring management.
"Organizational Economics Research in the U.S. Agricultural Sector and the Contracting and Organizations Research Institute" (with Harvey S. James, Jr.) American Journal of Agricultural Economics, 85 no. 2 (2004): 756-761
Organizational and contract economics have achieved an increasingly important role in analyses of the food, agribusiness, and agricultural sectors. In particular, formal theoretical models of contract design and firm integration have begun to appear in the leading agricultural economics journals. Although the introduction of organizational economic theory has allowed scholars to begin addressing the changing nature of the food, agribusiness, and agricultural sectors, empirical research in these sectors is less well developed. What empirical research does exist tends to focus on specific contracts or transactions in isolation of the surrounding economic and institutional environments, or to be based on limited samples of unique contract types. Despite recent advances, much work remains. We believe this future work will be characterized by three features: a continued accumulation of empirical studies of contract design and organizational structure, an increasing focus on the interdependencies between organizational and contract structures linking the overall value chain, and an increasing integration of theories from a variety of social science disciplines. This suggests a need for an accessible collection of contracts as data for these studies, a more holistic theory of economic sectors as systems rather than series of discrete blocks, and a forum for interdisciplinary interaction whereby the cross-fertilization of ideas across disciplines might occur more rapidly. In this paper, we argue the importance and value of these features to advance both theory and empirical research, and illustrate how they are being addressed and incorporated in current research programs at the Contracting and Organizations Research Institute.
"Regulation and the Evolution of Corporate Boards: Monitoring, Advising or Window Dressing?" (with Eric Helland) Journal of Law & Economics, 47 no. 1 (2004): 167-194
It is generally agreed that boards are endogenously determined institutions that serve both oversight and advisory roles in a firm. While the oversight role of boards has been extensively studied, relatively few studies have examined the advisory role of corporate boards. We examine the participation of political directors on the boards of natural gas companies between 1930 and 1998. We focus on the expansion of federal regulation of the natural gas industry in 1938 and 1954 and subsequent partial deregulation in 1986. Using data sets covering the periods from 1930 to 1990 and 1978 to 1998, we test whether regulation and deregulation altered the composition of companies' boards as the firms' environment changed. In particular, did regulation cause an increase and deregulation a decrease in the number of political directors on corporate boards? We find evidence that the number of political directors increases as firms shift from market to political competition. Specifically, the regulation of natural gas is associated with an increase in the number of political directors and deregulation is associated with a decrease in the number of political directors on boards.