CONTRACT INCENTIVES AND EXCESSIVE NITROGEN USE IN AGRICULTURE Report as inadecuate




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This study examines incentives for input use under tournament contracts. We analyze implications of contract design for nitrate-based environmental externalities generated by agricultural producers. Outcomes are compared from contracts awarded by tournament to those from fixed-payment contracts. Our findings show contract insecurity can distort input use. The model developed in this analysis is applied to a region of the U.S. where tournament-based production is prevalent and groundwater contamination is a problem. We find contract insecurity increases nitrogen use by about 12%, resulting in a 17% increase in nitrate leaching. Implications for contract modification to reduce environmental externalities while maintaining contract incentives are discussed.

Subject(s): Crop Production/Industries

Issue Date: 2000-12

Publication Type: Journal Article

PURL Identifier: http://purl.umn.edu/30902 Published in: Journal of Agricultural and Resource Economics, Volume 25, Number 2 Page range: 468-484

Total Pages: 17

Record appears in: Western Agricultural Economics Association > Journal of Agricultural and Resource Economics





Author: Preckel, Paul V. ; Shively, Gerald E. ; Baker, Timothy G. ; Chu, Mei-Chin ; Burrell, Jessica Eide

Source: http://ageconsearch.umn.edu/record/30902?ln=en



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