Hostname: page-component-77f85d65b8-2tv5m Total loading time: 0 Render date: 2026-04-21T03:01:06.747Z Has data issue: false hasContentIssue false
  • English
  • Français

Do Incentives for Quality Matter?

Published online by Cambridge University Press:  28 April 2015

Corinne Alexander ,
Rachael E. Goodhue  and
Gordon C. Rausser
Corinne Alexander
Affiliation:
Department of Agricultural Economics, Purdue University, West Lafayette, IN
Rachael E. Goodhue
Affiliation:
Department of Agricultural and Resource Economics, University of California, Davis, CA
Gordon C. Rausser
Affiliation:
Department of Agricultural and Resource Economics, University of California, Berkeley, CA
Get access Rights & Permissions [Opens in a new window]

Abstract

We use an unusual dataset involving 14 tomato growers over 4 years to analyze the effect of incentive contracts on behavior in a fixed effects econometric model. We find that growers respond to incentive contracts by improving tomato quality, as predicted by economic theory. The comparison is not confounded by the usual contract endogeneity and simultaneity problems because of characteristics of the processing tomato industry and our dataset. We discuss the implications of our findings for the design of agricultural contracts.

Keywords

contractspanel dataprocessing tomato industryD86C23Q13

Information

Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 39 , Issue 1 , April 2007 , pp. 1 - 15
Copyright
Copyright © Southern Agricultural Economics Association 2007

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

References

Ackerberg, D.A., and Botticini, M.. “Endogeneous Matching and the Empirical Determinants of Contract Form.” Journal of Political Economy 110(2002):564–91.CrossRefGoogle Scholar
Allen, D., and Lueck, D.. The Nature of the Farm: Contracts, Risk, and Organization in Agriculture. Cambridge, MA: MIT Press, 2002.Google Scholar
Bull, C, Schotter, A., and Weigelt, K.. “Tournaments and Piece Rates: An Experimental Study.” Journal of Political Economy 95(February 1987):1–33.CrossRefGoogle Scholar
Goodhue, R.E., Rausser, G.C., and Simon, L.K.. “Performance Pay and Producer Incentives: Analyzing Broiler Chicken Production Contracts.” Working paper, Dept. of Agriculture and Resource Economics, University of California, Berkeley, 1998.Google Scholar
Goodhue, R.E., Heien, D.M., Lee, H., and Sumner, D.A.. “Contracts and Quality in the California Winegrape Industry.” Review of Industrial Organization 23(December 2003):267–82.Google Scholar
Gould, W.A.Tomato Production, Processing and Technology, 3rd ed. Timonium, MD: CTI Publications, 1992.CrossRefGoogle Scholar
Hueth, B., and Ligon, E.. “Estimation of an Efficient Tomato Contract.” European Review of Agricultural Economics 29(June 2002):237–53.CrossRefGoogle Scholar
Knoeber, C.R., and Thurman, W.N.. “Testing the Theory of Tournaments: An Empirical Analysis of Broiler Production.” Journal of Labor Economics 12(April 1994):155–79.CrossRefGoogle Scholar
LaFontaine, F. “Agency Theory and Franchising: Some Empirical Results.” Rand Journal of Economics 23(Summer 1992):263–83.CrossRefGoogle Scholar
LaFontaine, F., and Shaw, K.. “The Dynamics of Franchise Contracting: Evidence from Panel Data.” Journal of Political Economy 107(October 1999):1041–80.CrossRefGoogle Scholar
Lazear, E. “Performance Pay and Productivity.” American Economic Review 90(December 2000):1346–61.CrossRefGoogle Scholar
Leegomonchai, P., and Vukina, T.. “Dynamic Incentives and Agent Discrimination in Broiler Production Tournaments.” Journal of Economics and Management Strategy 14(December 2005):849–77.Google Scholar
Lemmon, M.L., Schallheim, J.S., and Zender, J.F.. “Do Incentives Matter? Managerial Contracts for Dual-Purpose Funds.” Journal of Political Economy 108(April 2000):273–99.CrossRefGoogle Scholar
Miyao, G., Klonsky, K., and Livingston, P.. U. C. Cooperative Extension Sample Costs to Produce Processing Tomatoes in Yolo County—1997. University of California, Davis, Extension Bulletin TM-YO-97, 1997.Google Scholar
Murphy, K.J. “Incentives, Learning and Compensation: A Theoretical and Empirical Investigation of Managerial Labor Contracts.” Rand Journal of Economics 17(Spring 1986):59–76.CrossRefGoogle Scholar
Prendergast, C. “The Provision of Incentives in Firms.” Journal of Economic Literature 37(March 1999):7–63.CrossRefGoogle Scholar
Salanié, B. “Testing Contract Theory.” CESifo Economic Studies 49(Autumn 2003):461–77.CrossRefGoogle Scholar
Sims, W.L., Zobel, M.P., May, D.M., Mullen, R.J., and Osterli, P.P.. “Mechanized Growing and Harvesting of Processing Tomatoes.” Leaflet 2686, Division of Agricultural Sciences, University of California, March 1979.Google Scholar
Starbird, S.A. “The Effect of Quality Assurance Policies for Processing Tomatoes on the Demand for Pesticides.” Journal of Agricultural and Resource Economics 19(July 1994):78–88.Google Scholar
Wu, S. “Identifying ‘Incentive Effects’ Using Agricultural Contracting Data.” Working Paper, Dept. of Agricultural, Environmental, and Development Economics, The Ohio State University, Columbus, August 2005.Google Scholar
Wu, S., and Roe, B.. “Behavioral and Welfare Effects of Tournaments and Fixed Performance Contracts: Some Experimental Evidence.” American Journal of Agricultural Economics 87(February 2005):130–46.CrossRefGoogle Scholar