|The role of time preferences in contract breach: Evidence from Chinese poultry farmers participating in contract farming
HOU Jing1, 2, ZHOU Li2, Jennifer IFFT3, YING Rui-yao2
1 Business School, Jiangsu Normal University, Xuzhou 221116, P.R.China
2 College of Economics and Management, Nanjing Agricultural University, Nanjing 210095, P.R.China
3 Department of Agricultural Economics, Kansas State University, Manhattan, Kansas 66506, USA
Farmers’ contract breach behavior is cited as one of the major stumbling blocks in the sustainable expansion of contract farming in many developing countries. This paper examines farmers’ contract breach decisions from the perspective of time preferences. The empirical analysis is based on a household survey and economic field experiments of poultry households participating in contract farming conducted in Jiangsu Province, China. A discounted utility model and a maximum likelihood technique are applied to estimate farmers’ time preferences and the effect of time preferences on contract breach in the production and sales phases are explored with a bivariate probit model. The results show that, on average, the poultry farmers in the sample are generally present biased and impatient regarding future utility. The regression results show that farmers with a higher preference for the present and a higher discount rate are more likely to breach contracts, and time preferences play a greater role in the production phase than in the sales phase. When considering heterogeneity, specific investments and transaction costs promote contract stability only for farmers with a low degree of impatience. Moreover, compared with large-scale farmers, small-scale farmers’ contract breach decisions are more significantly affected by their time preferences. These results have implications for contract stability policies and other issues that are impacted by the linking of behavioral preferences to agricultural decisions.
Received: 07 June 2022
Accepted: 16 November 2022
|Fund: This work was supported by the National Natural Science Foundation of China (72003082 and 71573130), the Project of Philosophy and Social Science Research in Colleges and Universities in Jiangsu Province of China (2020SJA1015), the Priority Academic Program Development of Jiangsu Higher Education Institutions, China (PAPD), and the China Center for Food Security Studies, Nanjing Agricultural University, China.
|About author: Correspondence ZHOU Li, E-mail: firstname.lastname@example.org
Cite this article:
HOU Jing, ZHOU Li, Jennifer IFFT, YING Rui-yao.
The role of time preferences in contract breach: Evidence from Chinese poultry farmers participating in contract farming. Journal of Integrative Agriculture, 22(2): 623-641.
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