Arkansas Landlord Selection of Land-Leasing Contract Type and Terms

Abstract

Land leasing is a major source of the land input to production agriculture. Responses from a survey of landlords leasing crop land in Arkansas are analyzed to better understand those factors motivating landlords in the type of lease they select and the terms of those leases. Probit models are estimated to determine the relative importance of variables representing credit constraint, agency problem, and risk aversion factors. Regression models then estimate the impact of site, landlord, and tenant characteristics on contract terms - the percentage of crop and cost sharing arrangements between landlord and tenant. Probit results suggest credit constraint factors influence lease-type selection. Risk aversion, managerial ability, and social capital factors are also supported. Regression models show that land and crop characteristics are significant determinants of contract terms.