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

This article investigates the impacts of decoupled and coupled support payments on farmland rental contract choices using a principal-agent model. We consider cash and share contracts as well as hybrid contracts, which are increasingly prominent in US agriculture. The conceptual framework suggests that restrictions on sharing 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 subsidies.