land tenure and the adoption of conservation practices

Amer. J. Agr. Econ. 82(4) (November 2000): 993–1005Copyright 2000 American Agricultural Economics Association

Land Tenure and the Adoption ofConservation Practices

Meredith J. Soule, Abebayehu Tegene, and Keith D. Wiebe

We use a logit adoption model with data on 941 U.S. corn producers from the 1996 AgriculturalResource Management Study to analyze the influence of land tenure on the adoption of conserva-tion practices. We extend previous analyses by distinguishing renters according to lease type andby distinguishing practices according to the timing of costs and returns. We find that cash-rentersare less likely than owner-operators to use conservation tillage, but share-renters are not. Bothcash-renters and share-renters are less likely than owner-operators to adopt practices that providebenefits only over the longer term (grassed waterways, stripcropping, and contour farming).

Key words: Adoption, corn production, soil conservation practices, land tenure.

Introduction

Does land tenure affect a farmer’s adoptionof conservation practices? This is a classicquestion in economics. In the wake of theDust Bowl, Ely and Wehrwein argued that“[i]f the American farm owner’s ‘conserva-tion relationship’ to his farm is weak, it ispractically non-existent in the case of ten-ants” (p. 218), since tenure insecurity givesrenters little incentive to maintain soil fertil-ity or control erosion. The question remainsimportant today. Agricultural Census datashow that leasing declined from 45% of U.S.farmland in 1935 to 35% in 1950, but sub-sequently increased to 41% by 1997. Leas-ing is even more important in the Corn Belt,where in 1997 about half of all acres wereleased. Decisions by renters thus have impli-cations for overall adoption of conservationpractices in the U.S. If renters are indeed lesslikely than owner-operators to use conser-vation practices, programs to encourage theuse of conservation practices may need toconsider renters’ and landowners’ incentivesmore explicitly.The conventional hypothesis that owner-

operators are more likely than renters to

Meredith J. Soule, Keith D. Wiebe and Abebayehu Tegene areeconomists in the Resource Economics Division of USDA’sEconomic Research Service. Senior authorship is shared. Thehelpful comments of Roger Claassen, Ralph Heimlich, RobbinShoemaker, Gene Wunderlich, and two anonymous reviewers, aswell as the GIS support provided by Vince Breneman and theSAS assistance of Bill McBride, are gratefully acknowledged.Theviews expressed in this paper are those of the authors, and maynot be attributed to the Economic Research Service.

adopt conservation practices is easily testedwith appropriate data and models, and hasbeen explored by an extensive body ofresearch. However, research to date has pro-vided inconclusive or contradictory results,because it has not adequately addressedtwo important dimensions of the relation-ship between tenure and conservation. First,tenure’s impact may depend on the timingand magnitude of the costs and returns gen-erated by the conservation practice understudy. For example, conservation tillage mayincrease short-term profits due to cost savings,while it may take several years to generatepositive net returns to “medium-term prac-tices” such as contour farming, stripcropping,or grassed waterways. Tenure’s role in adop-tion is likely to vary with these differences.Secondly, different lease arrangements may

also influence renters’ conservation decisions.For example, share-renters may have an addi-tional incentive, relative to cash-renters, toadopt conservation practices that increaseuse of inputs for which they bear only a shareof the cost. Furthermore, landlords tend toparticipate more actively in the managementof farms rented under share leases (Rogers).This could induce share-renters to behavemore like owner-operators than cash-renters.Failure to consider such distinctions wouldobscure tenure’s true effect on the adoptionof conservation practices.This paper explores these two dimensions

both conceptually and empirically using newdata on corn production from the 1996Agricultural Resource Management Study

994 November 2000 Amer. J. Agr. Econ.

(ARMS) survey, which covers sixteen statesthat account for about 90% of corn farms,acres, and bushels harvested in the U.S.1

Previous Research

Farmers consider a variety of factors indeciding whether or not to adopt partic-ular conservation practices. Non-economicfactors play a role, such as awareness oflocal water quality problems or attitudestoward the environment (Ervin and Ervin;Lynne, Shonkwiler and Rola). Economic fac-tors, including both short-term profitabilityand long-term asset value, are also important(McConnell; Bills; Miranowski and Cochran).Following the conventional wisdom as artic-ulated by Ely and Wehrwein, renters wouldbe expected to be concerned about the short-term profitability of land they rent, but lessso about its long-term value. By contrast,owner-operators would be expected to careabout both short-term profitability and thelong-term value of their land. We wouldthus expect to see tenure-related differencesin adoption of different conservation prac-tices, depending on how those practices affectshort-term profitability, long-term value, orboth.A wide variety of activities may be con-

sidered conservation practices because theymaintain or improve soil fertility, or reducesoil erosion and runoff of nutrients and pes-ticides. These include residue managementpractices (e.g., conservation tillage), soil-conserving crop rotations, nutrient and pestmanagement practices, and land improve-ments (e.g., installation of grassed water-ways). These practices differ from oneanother and from conventional managementpractices in the expected magnitude and tim-ing of their costs and returns to the farmer.Some practices, such as conservation tillage,may be profitable in the short term due toreduced labor and machinery costs (Klemme;Rahm and Huffman). Others may becomeprofitable only over the medium term (e.g.,contour farming, stripcropping, and grassedwaterways) or the long term (e.g., terrac-ing) as they control erosion and maintainor enhance soil fertility and thus improve

1 The states are Kansas, Nebraska, South Dakota, and Texas(Plains); Michigan, Minnesota, Pennsylvania, and Wisconsin(North Central); Illinois, Indiana, Iowa,Missouri, and Ohio (CornBelt); North Carolina, South Carolina and Kentucky (East).

productivity and land values. Day, et al.calculated net returns to conservation andconventional tillage under corn production inten Corn Belt states using 1996 data. Aver-age net returns per acre under conserva-tion tillage ranged from $168 to $251. Underconventional tillage, net returns ranged from$127 to $246. They concluded that net returnswith conservation tillage generally equal orexceed net returns with conventional tillage,while variable costs are the same or lowerwith conservation tillage. According to FarmService Agency records, annualized costs forgrassed waterways, stripcropping and con-tour farming averaged $15, $6 and $1 peracre, respectively, for the sixteen states inthis study in 1996. Some farmers may havereceived federal cost-shares of up to 80%.Tenure has been conceptualized in many

ways in research on the adoption of conser-vation practices. Most studies have sampledfarm operators, using the proportion of farmacres that are rented to indicate tenure sta-tus (Rahm and Huffman; Belknap and Saupe;Norris and Batie;Featherstone andGoodwin).Others have used dummy variables to iden-tify operators as full-owners, owner-renters orfull-renters (Lynne, Shonkwiler and Rola), orto identify fields as owner-operated or not(Fuglie and Bosch). Alternatively, a few stud-ies have sampled landlords (Lee; Lee andStewart; Heimlich), using dummy variables todistinguish full-owner operators, part-owneroperators, and non-operator landlords. Lit-tle attempt has been made to differenti-ate between cash-renters and share-renters,although share leases represent 30% of allfarmland lease contracts and area in the U.S.,and around 40% in the Corn Belt (Rogers).This neglect may be significant since share-renters, with more active landlord participa-tion in farm decisions, may be more likelythan cash-renters to adopt conservation prac-tices (Esseks and Kraft).Most empirical research on the relation-

ship between tenure and conservation prac-tices has focused on the adoption of someform of conservation tillage or crop residuemanagement. Several studies support conven-tional expectations that owner-operators aremore likely than renters to adopt conser-vation tillage (e.g., Lynne, Shonkwiler andRola using Florida data; Belknap and Saupeusing Wisconsin data; and Ribaudo andShoemaker using national data). However,a second group of studies found no signifi-cant relationship between tenure and adop-tion of conservation tillage (e.g., Rahm and

Soule, Tegene, and Wiebe Land Tenure and Conservation Practices 995

Huffman using Iowa data; Norris and Batieusing Virginia data; and Fuglie and Klotzusing data from Pennsylvania and Maryland).Lee did not examine conservation tillagedirectly, but found no significant differencesin soil erosion rates between tenure groupsat the national level. Also using national-level data, Bills found that rented landerodes more rapidly than owner-operatedland, but attributed this to the greater pro-portion of rented land in erosive row cropsrather than to inferior conservation practices.Finally, Hinman, Mohasci and Young foundthat conservation tillage became profitablesooner for renters than for owner-operatorsin Washington and Idaho, apparently becauseshare-renters realized a higher share of thecost savings than they bore of the yieldreductions.2Less research has been done on medium

or long-term conservation practices, such ascrop rotations, stripcropping, grassed water-ways, contour farming, or investments in soilconservation structures such as terraces. Suchinvestmentsareexpected toproduce long-termbenefits but they may also involve significantshort-term costs. Conventional wisdom thusholds that the adoption of medium and long-term conservation practices will be closelyassociated with land ownership. In studiesexamining such practices, the dependent vari-able has often been defined as either thenumber of practices used (Ervin and Ervin;Lynne, Shonkwiler and Rola) or as expen-ditures on conservation investments (Norrisand Batie; Nielsen, Miranowski and More-hart; Featherstone and Goodwin; Young andShortle). Tenure was found to be significantin four of these six studies. Ownership of theland was found to have a positive impact onconservation investment expenditures and anegative impact on the number of conserva-tion practices used.

Conceptual Framework

We extend these earlier analyses by devel-oping a simple two-period model based onMcConnell. Assume that farmers choose a

2 Lee and Stewart reported that full-owner operators were lesslikely to adopt minimum tillage or residue management prac-tices than were part-owner operators or non-operator landlords.Heimlich countered that both minimum tillage and residue man-agement are necessary to improve soil conservation; repeatingLee and Stewart’s analysis accordingly, he found no differenceby tenure.

production practice i (and associated inputlevels) to maximize the present value (PV) ofcurrent net returns plus terminal land value:

max(i)

PVi = πi + Vi/(1+ r)(1)

where πi = current net returns under prac-tice i Vi = terminal land value (itself a func-tion of expected future net returns) givenpractice i in the first period, and r = thediscount rate. We designate i = t for a tra-ditional production practice and i = c for aconservation practice, where the conservationpractice reduces soil erosion relative to thetraditional practice, maintains or improvesland productivity over time, and better pre-serves the long-term value of the land. ThusVc > Vt Farmers select the optimal practiceby choosing i to maximize equation (1).Although risk is one possible explanation

for the use of share-leases (Cheung; Stiglitz),a share-lease may be more efficient thana cash-lease even under conditions of cer-tainty (Robison and Barry). Our goal is notto explain choice of lease-type but rather toexamine technology choice, given the choiceof lease. However, we recognize that therenter may not have a choice in the technol-ogy if the landowner stipulates in the leasecontract that the renter must use a particu-lar practice. In that case, the renter does notchoose the production practice directly, butrather chooses to accept or reject the leasecontract. All observed renters have chosen toaccept the contract, and we assume that theyhave done so because they can farm prof-itably, given the conditions of the contract.The conventional hypothesis that owner-

operators are more likely than renters toadopt conservation practices can be exploredby weighting the second term on the right-hand side of equation (1) by a tenure-securityindicator γ which represents the farmer’ssubjective belief that he will be able to use orsell the land in the second period:

max(i)

PVi = πi + γVi/(1+ r) (2)

Empirical data on the value of γ is scarce.3Given the lack of data, it is reasonable toassume that γ = 1 for owner-operators. Ely

3 Information on terms of lease contracts and variables thatimpact the level of γ for renters, such as length of lease and thenumber of years a renter has been leasing the field, would bevery useful but was not available for this study. Future surveyson the adoption of conservation practices would be enhanced ifsuch questions were incorporated.


andWehrwein might argue that γ is near zerofor renters, but it is sufficient to assume that0 ≤ γrenter < γowner-operator. For example, wecan think of γrenter as being closer to 1 thestronger is the renter’s belief that the leasewill continue beyond the first period. Thus,γrenter would depend on the expected durationof the lease. It is optimal for a risk-neutralfarmer to adopt the conservation practicewhen

πc + γVc/(1+ r) > πt + γVt/(1+ r)(3)

i.e., when πc > πt − γ(�V )

where �V = (Vc − Vt)/(1 + r). Since �V >0 and γrenter < γowner-operator the thresholdlevel of πc is lower for owner-operators thanfor renters, as reflected in the conventionalhypothesis.Substituting the relevant values of γ for

owner-operators and renters into condi-tion (3) yields the criteria for adoption ofa given conservation practice. If the conser-vation practice offers short-term gains rel-ative to the traditional practice (as is thecase for conservation tillage under certain cir-cumstances), the value of γ is irrelevant andboth owner-operators and renters will adoptthe conservation practice. If the conservationpractice involves short-term losses that areexceeded by gains in the present value offuture net returns (as is the case for mediumor long-term practices under certain condi-tions), owner-operators and some renters willadopt it. If short-term losses exceed long-term gains, the value of γ is again irrelevantand no farmer will adopt the conservationpractice. Thus we see that the hypothesizedrelationship between tenure and the adoptionof conservation practices depends on the typeof conservation practice under study.The conventional hypothesis is also inad-

equate in its failure to distinguish betweendifferent types of renters. Accordingly wegeneralize equation (2):

max(i)

PVi = αRi − βCi + γVi/(1+ r)(4)

where Ri = revenues under practice i α =the farmer’s share of revenues, Ci = costsunder practice i, and β = the farmer’s shareof costs. This allows us to distinguish threetypes of farmers according to field tenure sta-tus by the parameters αβ, and γ 4 Owner-operators receive all revenues (α = 1), bear

4 Individual farmers may operate multiple fields under multipleforms of tenure; we are concerned here with tenure’s effect onthe operation of each field individually.

all costs (β = 1), and weigh terminal landvalue fully (γ = 1) when selecting productionpractices on a particular field. Cash-rentersalso receive all revenues and bear all costs(α = β = 1), but weigh future net returnsless heavily (0 ≤ γ < 1) than do owner-operators. Share-renters receive a share ofrevenues (0 < α < 1), bear a portion of costs(0 < β < 1), and, like cash-renters, weighfuture net returns less heavily (0 ≤ γ < 1)than do owner-operators.Distinguishing cash-renters and share-

renters from owner-operators is importantbecause they have potentially different incen-tives to adopt conservation practices. On theone hand, the first-order conditions for profitmaximization imply that, when choosinginput levels, share-renters do not set marginalrevenue equal to marginal cost but to β/αtimes marginal cost, and in general, β �= α On the other hand, the adoption incentivefor share-renters can also be affected by dif-ferences in shares since β often varies byinput. For example, because γ < 1, bothcash renters and share renters would expectto realize less long-term benefits from con-servation tillage than would owner-operators.For share renters, however, this effect mightbe counterbalanced by increased short-termprofits if conservation tillage increased theuse of a shared input, such as pesticides, whiledecreasing the use of a renter-provided input,such as machinery or labor. This leads to arefinement of the conventional hypothesis asexpressed in the following prediction:

P1: Share-renters and owner-operators areequally likely to adopt conservation tillage,while cash-renters are less likely thanowner-operators to adopt conservationtillage.

It is also important to keep in mind theincentives of landlords, although the litera-ture on share tenancy has not always done sosufficiently (Hayami and Otsuka; Miranowskiand Cochran). For example, landowners whobear additional input costs when their share-tenants switch to conservation tillage mayseek to change the terms of share con-tracts (α and/or β) or switch to cash leases.Evidence suggests that this may already beoccurring (Thompson). Even in the absenceof distortions introduced when β is not thesame for all inputs, why would a landownerlease his land to a renter when long-termgains from adoption exceed short-term losses,


and allow soil depletion at a rate higher thanhe would generate as an owner-operator? Tojustify rental, the landowner should receivean additional payment in order to compen-sate for the renter’s weaker incentive to pre-serve the land’s value, or require adoption ofthe conservation practice.A renter with a contract requiring a con-

servation practice will be observationallyequivalent to a farmer who chooses a conser-vation practice because it is more profitable.For renters with a conservation requirementin their contract, γ in equations 2–4 would beirrelevant because the renter does not choosebetween the conservation and conventionalpractice. If many landowners are requiringthat their renters use conservation practices,the model developed in equations 1–4 wouldnot apply, and we would not expect to see anydifferences in conservation practice adoptionbetween owner-operators and renters.In practice, the transaction costs of enforc-

ing the use of conservation practices maybe higher for some landlords, making it lesslikely that they will find it profitable torequire such practices. For example, Rogersfound that 62% of landlords were neitherengaged in nor retired from any agriculturalactivity, and 16% of landlords lived morethan 150 miles from their land—factors thatmay be associated with reduced participationin farm decisionmaking and less awareness ofconservation needs and practices.If it is costly for landowners to require

adoption of conservation practices (or todetermine and enforce payment of a pre-mium), it seems reasonable to expect thatsuch transaction costs would be inverselyrelated to the extent of the landowner’s par-ticipation in farm management. Census ofAgriculture data show that in addition tosharing input costs and output, landown-ers participate more actively in managementunder share leases than they do under cashleases (Rogers). This leads to an additionalprediction:

P2: Cash-renters are less likely than owner-operators to adopt medium-term con-servation practices, while the effect ofshare-leasing on adoption of medium-termconservation practices is ambiguous.

Empirical Model

In order to test hypotheses related to thepredictions developed above, we assume that

there is an unobserved or latent variable, y∗,that generates the observed variable y , whichrepresents a farmer’s decision to adopt a con-servation practice or not. The latent variabley∗ equals πc − πt + γ(�V ) from equation 3.When y∗ is positive, the conservation prac-tice is adopted and y = 1 is observed. Other-wise, the conservation practice is not adoptedand y = 0 is observed. Additionally, y = 1is observed when a renter’s contract requiresthe use of a conservation practice, since thenπt and γ(�V ) are irrelevant.For farmer j , the latent variable y∗

j isassumed to be related to observed farmer(and other) characteristics through a struc-tural model as follows (Long):5

y∗j = �′Xj + ej (j = 1 N )(5)

where Xj is a vector of farm, farmer, field,and regional characteristics, δ is a coefficientvector, and ej is a random disturbance. Theny∗j is linked to yj as follows:

yj = 1 if y∗j > 0(6)

and yj = 0 if y∗j ≤ 0

Farmer j adopts the conservation practice ify∗j > 0 The probability that yj = 1 is then:

Pr [yj = 1] = Pr [y∗j > 0](7)

= Pr [�′Xj + ej > 0]

= 1− F(−�′Xj)

= F(�′Xj)

where Pr [·] is a probability function and F(·)is the cumulative distribution function. Theexact distribution of F depends on the dis-tribution of the random term ej . If ej is dis-tributed as a logistic random variable, thenwe have a logit statistical model. The empiri-cal model is estimated both for conservationtillage and for medium-term practices.

Data and Methods

The data used in this study were obtained pri-marily from the 1996 Agricultural Resource

5We use the latent variable approach to derive the empiri-cal binary adoption model. However, equivalent binary responsemodels, which are widely used in the study of agricultural tech-nology adoption, can also be derived from the random utilitymodel (Wu and Babcock; Fuglie and Bosch) or from a nonlinearprobability model (Long).


Management Study (ARMS) survey admin-istered by the USDA’s National AgriculturalStatistical Service (NASS). ARMS integratesfield-level cropping practices data with farm-level financial and demographic data. Com-plete records are available for 941 U.S.corn producers in 1996. Since practice andtenure data were collected at the field level,our analysis is restricted to decisions onthat particular field (recognizing that farmersmay choose different practices for differentfields). Additional data were obtained fromthe NRCS-Oregon State University PRISMproject (for temperature and precipitation)and the 1990 Census of Population (for urbanproximity).

Table 1. Summary statistics for U.S. corn producers, 1996 ARMS Survey

Std.Variable Mean Dev. Description

Conservation tillage 0 31 0 62 Conservation tillage used in the field (1 = yes, 0 = no)Med-term practices 0 38 0 93 Contour farming or stripcropping or grassed

waterways established in the field (1 = yes, 0 = no)Farm size 6 12 7 42 Hundreds of acres operated by the farmerOperator’s age 51 25 34 79 Farm operator’s age, in yearsCollege education 0 41 0 68 Farm operator had some college education (1 = yes,

0 = no)Program participation 0 78 1 02 The farm operator participated in government

programs if s/he received any government payments(1 = yes, 0 = no)

LRPT farmer 0 26 0 83 Small farm operators who had a main occupationother than farming, were retired, or had gross salesunder $100,000 and total farm assets under$150,000 (1 = yes, 0 = no)

Corn-soy percent 0 52 0 81 Fraction of the farm planted to corn or soybeansHEL designation 0 20 0 69 Field classified as “Highly Erodible” by NRCS

(1 = yes, 0 = no)Improved drainage 0 39 0 83 Field has some type of improved drainage (1 = yes,

0 = no)Urban proximity 1 09 2 29 An index of population weighted by the inverse of

distance squared, over 100Annual precipitation 0 88 0 30 30-year average annual precipitation, in metersMean temperature 49 17 15 43 30-year average temperature, in ◦FOwner-operator 0 63 0 76 Field is operated by the owner (1 = yes, 0 = no)Cash-renter 0 20 0 51 Field is operated by a renter under a cash lease

(1 = yes, 0 = no)Share-renter 0 17 0 54 Field is operated by a renter under a share lease

(1 = yes, 0 = no)Plains 0 17 0 72 The farm is located in SD, NE, KS, or TX (1 = yes,

0 = no)North Central 0 31 0 88 The farm is located in MN,WI, MI, or PA (1 = yes,

0 = no)Corn Belt 0 45 0 77 The farm is located in IA, MO, IL, IN, or OH

(1 = yes, 0 = no)East 0 07 0 29 The farm is located in KY, NC, or SC (1 = yes,

0 = no)

Sources: ARMS, Census, PRISM.

Because the ARMS data are derived froma complex sampling frame that involvesmultiple phases of sampling and stratifica-tion, including post stratification to adjust fornon-response, conventional regression meth-ods yield parameter estimates for which thestandard errors are biased.We used a “delete-a-group jackknife” procedure (Kott) with areplication method for variance estimationthat computes unbiased standard errors.Descriptive statistics for the variables

selected for analysis are presented in table 1.Survey weights, based on the selection prob-ability of each farm, were provided by NASSand used to expand from the sample tothe population of U.S. corn producers in


the sixteen states under study. “Adopters”are farmers who used conservation tillageor one or more “medium-term” conservationpractices (contour farming, stripcropping, orgrassed waterways) in 1996 on the sur-veyed field. Conservation tillage was adoptedon 31% of sampled fields, while contourfarming or stripcropping or grassed water-ways was adopted on 38% percent of sam-pled fields. Sixty-three percent of sampledfields were owner-operated, while 20% werecash-rented and 17% were share-rented.To isolate the impact of tenure from that

of other factors, the effects of farmer, farm,field and regional attributes are also exam-ined. Attributes of the farmer include oper-ator’s age, education, government programparticipation, and farmer type. Younger andmore educated farmers are more likely toperceive increased profits from new tech-niques (Feder and Umali). Operators farm-ing highly erodible land (HEL) must havean approved conservation plan in order toreceive certain federal government payments,increasing the likelihood that farmers receiv-ing such payments will realize higher returnsfrom conservation practices than from con-ventional practices. We hypothesize thatlimited-resource, retired or part-time (LRPT)farmers are less likely to find conservationpractices to be more profitable than conven-tional practices because they have less timeand other resources to devote to farming.Farm attributes include farm size, the per-

centage of the farm in corn and soybeans,and proximity to urban areas. Large farmsize and area cropped with corn and soy-beans have been linked with increased like-lihood to adopt conservation tillage becausefarmers can spread equipment costs overlarger areas (Fuglie and Klotz; Gould, Saupeand Klemme; Lee and Stewart; Rahm andHuffman). For medium-term practices, how-ever, the results from earlier studies are notas clear since the same economies of scaleare not available. Norris and Batie found thatconservation expenditures increased withfarm acreage, but others found no significantrelationship between cropland acreage andconservation expenditures (Featherstone andGoodwin) or number of conservation prac-tices (Ervin and Ervin). We also included anurban proximity variable to account for thepossibility that the farm might be convertedto a non-agricultural use in the near future,reducing future benefits from conservationpractices and decreasing perceived returns to

adoption. This variable is an index of popu-lation within fifty miles of the sampled farm,weighted by the inverse of the squared dis-tance from the sampled farm.Variables that are specific to the field

under study are HEL designation, improveddrainage, and tenure.6 By definition, HELneeds conservation to maintain productiv-ity, so conservation practices would likely bemore beneficial on HEL than on non-HEL,whether the farmer participates in govern-ment programs or not. Improved drainagemay indicate inherently wet soils that are lesssuited to the use of conservation tillage.Regional effects are captured by aver-

age annual temperature and precipitationand by regional dummy variables. Conserva-tion tillage performs less well on cold andwet soils, making adoption less profitable inthose areas. In contrast, medium-term prac-tices are more likely to be profitable inareas of high rainfall and potentially higherrunoff or erosion. To capture these effects, anAveraged Shifted Histogram (ASH) estima-tor (Scott and Whittaker) was used to esti-mate temperature and precipitation at eachsampled farm, based on weather data com-piled by NRCS and Oregon State University.Four regional dummy variables (Plains, NorthCentral, Corn Belt, and East—see footnote 1)control for regional characteristics such astopography, policy, and extension services.

Estimation and Results

We first test a pair of hypotheses we callthe base model: that owner-operators andrenters are equally likely to adopt conserva-tion tillage when it offers short-term gains,and that owner-operators are more likelythan renters to adopt medium-term practices.In both cases, we test the null hypothesisthat θr = 0, where θr is the coefficient on adummy variable that is 1 for renters and 0 forowner-operators. Including a dummy variablefor tenure implicitly assumes that only theintercept term differs by tenure; slope coef-ficients are initially assumed constant acrosstenure classes.Results of the base model for conserva-

tion tillage are presented in the second col-umn in table 2. The coefficient on “Renter”

6 In some models we included field size as an explanatory vari-able; however, field size is highly correlated with farm size, andit was not significant in any of the models.


Table 2. Results of the Logit Regression Models for Conservation Tillage, Full Sample(Base) and by Tenure Class, U.S. Corn Producers, 1996

Variable Base Owner Cash-Renter Share-Renter

Intercept 4 97 4 63 3 25 7 01(2 74) (1 65) (0 84) (1 24)

Farm size 0 02 0 01 0 06 0 02(2 77) (0 73) (0 91) (0 64)

Operator’s age −0 02 −0 02 −0 02 0 01(−2 15) (−1 93) (−0 92) (0 30)

College education 0 63 0 58 0 62 1 05(1 76) (1 27) (1 38) (1 93)

Program participation −0 54 −0 68 0 08 −0 01(−1 32) (−1 50) (0 07) (−0 01)

LRPT farmer −0 92 −0 96 −0 88 −1 14(−3 52) (−2 91) (−1 33) (−1 31)

Corn-soy percent 0 75 0 58 1 33 0 63(2 29) (1 18) (1 33) (0 56)

HEL designation 0 77 0 40 1 38 1 80(3 23) (1 31) (3 35) (1 58)

Improved drainage −1 14 −1 19 −0 79 −1 50(−4 42) (−2 74) (−1 29) (−2 54)

Urban proximity 0 08 0 07 0 27 −0 32(0 96) (0 46) (1 73) (−1 09)

Precipitation −1 01 −2 99 0 36 3 75(−0 97) (−1 59) (0 11) (1 15)

Temperature −0 05 0 01 −0 09 −0 17(−1 42) (0 14) (−0 97) (−1 82)

Plains −1 59 −2 16 −0 56 −2 04(−2 00) (−1 89) (−0 40) (−0 76)

North Central −2 04 −2 01 −1 69 −2 17(−3 55) (−2 26) (−1 59) (−0 89)

Corn Belt −1 50 −1 39 −1 60 −3 20(−2 69) (−1 75) (−1 66) (−1 56)

Renter −0 35(−1 58)

% correctly predicted 68 5% 64 9% 70 7% 66 9%

Note: (t-statistics in parentheses; critical t = 2 15 at 95% and 1.76 at 90% for two-tailed tests)

is negative but not significant. Consistentwith past studies, adoption is significantlyand positively associated with farm size, edu-cation, the proportion of the farm in cornor soybeans, and HEL designation. Olderfarmers and LRPT farmers were significantlyless likely to use conservation tillage, aswere those with fields that have improveddrainage. Neither climate variable was signifi-cant, but farmers in the East were more likelyto use conservation tillage than farmers inother regions, probably due to the high rateof adoption in Kentucky (62%), where con-servation tillage has a long history of innova-tion and extension support.In the base model for medium-term prac-

tices (column 2 of table 3), the coefficienton the renter dummy variable is negativeand significant. Similar to conservation tillage,

operator’s age and LRPT farmers are sig-nificant and negatively associated with adop-tion, while HEL designation has a positiveand significant impact. However, we also seethat the sign on variables other than tenurecan vary across conservation practices. Forexample, farm size and the proportion ofthe farm in corn or soybeans are negativeand significant for medium-term practices,but positive and significant for conservationtillage. This may be because the medium-term practices do not offer the economiesof scale offered by conservation tillage. Inaddition, education and improved drainageare significant for conservation tillage but notfor the medium-term practices. Precipitationis positive and significant for the medium-term practices, indicating that such practicesoccur more frequently where water erosion


is a concern. For medium-term practices, theregional dummy variables are not significant.The nonsignificance of the tenure coeffi-

cient in the conservation tillage model, andnonsignificant coefficients on similar tenurevariables in other studies, may stem froma failure of the base model to recognizethe different incentives facing cash-rentersand share-renters.Accordingly, we distinguishcash-renters from share-renters by replac-ing the base model’s Renter dummy withtwo tenure dummies (cash-rented = 1,otherwise = 0; and share-rented = 1,otherwise = 0). The first modified model testsprediction P 1, that share-renters and owner-operators are equally likely to adopt con-servation tillage, while cash-renters are lesslikely than owner-operators to adopt con-servation tillage. The second modified modeltests hypothesis P 2, that cash-renters areless likely than owner-operators to adoptmedium-term conservation practices, whilethe effect of share-leasing on medium-termconservation practice adoption is ambiguous.In both modified models, the null hypothesesare that θcr = 0 and θsr = 0, where θcr andθsr are the coefficients on the cash-renter andshare-renter dummies, respectively.Results for this modified model (not

shown) are similar to the base modelexcept for the tenure variables. For conser-vation tillage, coefficients (and t-statistics)on the cash-renter and share-renter vari-ables are −0 54 (−2 05) and −0 12 (−0 42),respectively; cash-renters are significantly lesslikely than owner-operators to use con-servation tillage, while there is no signifi-cant difference between owner-operators andshare-renters. For medium-term practices,coefficients on the cash-renter and share-renter variables are both negative and signif-icant, at −0 66 (−2 35) and −0 68 (−2 18),respectively, perhaps because expected futurereturns to such practices are insufficient tooutweigh short-term losses. For both typesof practices, the results of the statistical testsconform closely to the predictions based onthe conceptual model.It is somewhat surprising that government

program participation is not significant in anyof these models, but it is difficult to disen-tangle the interaction of program participa-tion and HEL designation. Most farmers whocultivated highly erodible land in our samplealso received payments through USDA pro-grams, meaning they were subject to the con-servation compliance provision of the 1985

Farm Act. Because of the high degree of cor-relation (0.92) between farmers with HELand program participants with HEL, we areunable to distinguish the effect of the com-pliance requirement from that of HEL alone.Nevertheless, it seems that farmers are morelikely to use conservation practices on HELfields at least partly to satisfy conservationcompliance requirements.The final test we conducted was to inves-

tigate whether slope coefficients (in additionto intercept terms) differ with tenure. Weestimated a single extended equation includ-ing interaction terms between the two tenuredummies and each of the other indepen-dent variables, which is analogous to esti-mating separate equations for each of thethree tenure categories. Based on a likelihoodratio test, we reject the null hypothesis thatthe slope coefficients are identical acrosstenure classes, both for conservation tillageand for medium-term practices, meaning thatthe impact of other factors on adoptiondepends on the tenure status of the opera-tor.The resulting coefficients are presented intables 2 and 3 for the conservation tillage andmedium-term practices models respectively.For owner-operators, adoption of conser-

vation tillage is significantly and negativelyassociated with farmer characteristics, such asage and LRPT status, and with the existenceof improved drainage. Owner-operators inthe Plains and the North Central region werealso less likely to use conservation tillagethan those in the East. For cash-renters, onlyHEL designation is significant. For share-renters, adoption of conservation tillage isinfluenced positively by education and nega-tively by improved drainage and temperature.The regional dummies are not significant forcash-renters or share-renters.Past studies have found farm size to be

positively associated with the adoption ofconservation tillage, which is consistent withour full-sample results. However, we foundthat farm size was not significant in explain-ing adoption of conservation practices wheneach tenure class was analyzed separately.This may be due to the fact that farm size islarger, on average, for share-renters and cash-renters than it is for owner-operators or thefull sample, with means (and standard devi-ations) of 866 (2073), 722 (1536), 508 (1065),and 612 (742) acres, respectively.Factors affecting the adoption of medium-

term practices also differ with tenure. For


Table 3. Results of the Logit Regression Models for “Medium-Term Practices,” Full Sample(Base) and by Tenure Class, U.S. Corn Producers, 1996

Variable Base Owner Cash-Renter Share-Renter

Intercept 7 35 6 93 10 72 4 01(2 98) (2 22) (1 85) (1 13)

Farm size −0 02 −0 03 −0 02 −0 02(−1 91) (−1 65) (−0 35) (−0 61)

Operator’s age −0 03 −0 04 −0 02 −0 02(−3 68) (−3 00) (−1 18) (−0 92)

College education −0 02 0 10 0 13 −0 40(−0 08) (0 22) (0 21) (−0 76)

Program participation −0 04 0 06 −0 84 −0 02(−0 15) (0 17) (−0 79) (−0 01)

LRPT farmer −0 59 −0 67 0 38 −0 87(−3 04) (−1 98) (0 52) (−1 00)

Corn-soy percent −0 56 −0 98 0 27 0 41(−1 79) (−2 34) (0 28) (0 36)

HEL designation 2 48 2 73 2 18 2 74(10 61) (8 00) (3 57) (3 45)

Improved drainage −0 06 −0 17 0 18 0 06(−0 20) (−0 39) (0 36) (0 13)

Urban proximity 0 13 0 24 0 10 −0 57(1 39) (2 76) (0 58) (−2 07)

Precipitation 4 53 3 89 4 27 7 42(2 91) (1 85) (2 23) (2 55)

Temperature −0 22 −0 20 −0 27 −0 24(−4 38) (−3 46) (−2 14) (−2 03)

Plains 0 92 1 15 −1 16 1 52(0 98) (0 86) (−0 48) (0 76)

North Central 0 51 0 79 −1 52 1 14(0 93) (1 17) (−1 55) (0 05)

Corn Belt 0 76 1 03 −0 64 0 89(1 62) (1 41) (−0 87) (0 63)

Renter −0 67(−2 46)

% correctly predicted 73 4% 71 3% 71 1% 78 5%

Note: (t-statistics in parentheses; critical t = 2 15 at 95% and 1.76 at 90% for two-tailed tests)

owner-operators, age, LRPT status, corn-soy percent and temperature are inverselyrelated to adoption, while urban proximity,HEL designation and precipitation are pos-itively associated with adoption. The posi-tive sign on the urban proximity variable isthe opposite of the hypothesized effect, per-haps because farmers closer to urban areashave more opportunities for earning off-farmincome and thus are more able to invest inconservation structures. For both cash-rentersand share-renters, field and climate variablesare significant while farmer characteristicsare not. HEL designation and precipitationare positively associated with adoption, whiletemperature is negatively associated withadoption. Urban proximity is negative andsignificant for share-renters.

A review of tables 2 and 3 shows theimportance of HEL designation in the adop-tion of conservation practices. To furtherexplore the relationships between tenure,HEL, and adoption, we used the coefficientsfrom tables 2 and 3 to estimate probabilitiesof adoption for each tenure class and prac-tice and then charted how those probabilitieschange with HEL status (figure 1). At tenuresubsample means, all else being equal, proba-bilities of adoption for owner-operators, cash-renters and share-renters, are roughly twiceas high on HEL fields (0.36, 0.47, and 0.58,respectively) as on non-HEL fields (0.27, 0.22,and 0.27). The impact of HEL designationis even more striking for medium-term prac-tices. Adoption probabilities increase three-fold or more with HEL designation, from0.27, 0.22, and 0.11 to 0.85, 0.72, and 0.66.


Figure 1. Predicted probability of adoption by practice, tenure, and HEL designation

These results suggest that conservationcompliance requirements may be moreimportant to cash-renters and share-rentersthan to owner-operators when encouragingthe use of conservation tillage on HEL.It appears that factors other than HELand conservation compliance are driving thedecisions of owner-operators. However, thepresence of HEL is nearly equally impor-tant to all tenure classes in predicting theadoption of medium-term practices. Giventhe close correlation between farmers withHEL and program participants with HEL,this effect may be driven at least in partby the need to meet conservation compli-ance requirements in order to receive pro-gram payments. To the extent that this is thecase, such requirements—and the programpayments that give them leverage—play acritical role in encouraging adoption.

Discussion

Our results indicate that land tenure is animportant factor in farmers’ decisions toadopt conservation practices, in ways that arenot revealed in conventional analyses. Cash-renters are less likely than owner-operatorsto use conservation tillage, while share-renters behave much like owner-operatorsin adopting conservation tillage. Both share-renters and cash-renters are less likely than

owner-operators to adopt at least one of themedium-term practices. This suggests that thetiming of benefits from conservation prac-tices affects decisions about their adoption,and that landowners are not fully success-ful in requiring tenants to adopt practiceswith delayed benefits. The effects of otherfarmer and land characteristics on adoptionalso vary with tenure, the most striking beingthe importance of HEL designation in pre-dicting the adoption of medium-term prac-tices by all tenure types and the adoption ofconservation tillage by cash-renters.These findings have important implications

for resource use and quality. Over 40% ofU.S. farmland (and about 50% of Corn Beltfarmland) is now leased. In addition, a major-ity of agricultural landowners are neitherengaged in nor retired from farming, suggest-ing that landlords are less involved in themanagement decisions made by their tenants.Given the adoption probabilities that we esti-mated for each of the tenure classes, thesefactors suggest that gains in the adoption ofconservation practices in the future may belower than expected if efforts are not tar-geted to increasing adoption on rented lands.Also, since HEL designation is so impor-tant in explaining conservation decisions,the question arises as to whether renterswould continue conservation tillage, and ifall farmers would continue using medium-term practices, at the same levels if not sub-


ject to conservation compliance provisions. Ifnot, the use of conservation practices coulddecrease as the leverage provided by conser-vation compliance falls with declining farmprogram payments under the 1996 FAIRAct.While we have modeled the adoption deci-

sion as a private choice based on farmers’maximization of private net returns, suchfindings raise concerns that go beyond pri-vate costs and benefits based on changesin soil productivity over time. The adoptionof conservation practices also provides pub-lic benefits in terms of water quality andother environmental characteristics. To theextent that protecting such benefits requirespublic policies to influence private decisions,our results indicate the importance of rec-ognizing the role of tenure in the adoptionof conservation practices, and of encourag-ing increased adoption by renters in partic-ular, especially with respect to medium-termpractices.Further research will be necessary to shed

light on these and other aspects of the rela-tionship between tenure and the adoptionof conservation practices. While our concep-tual framework is quite general, our empiricalanalysis focused on U.S. corn producers. Datalimitations currently constrain our ability togeneralize to other commodities or countries,but new ARMS data will soon permit similaranalyses of U.S. soybean and wheat produc-ers. Additional detail on lease duration, land-lord participation, and the date conservationpractices were established would allow con-sideration of longer-term practices and struc-tures such as terraces as well. Our findingsalso indicate the need for improved under-standing of the decision by landowners andfarmers to acquire or lease land in the firstplace, of the extent to which landlords canrequire tenants to adopt particular produc-tion or conservation practices, and thus ofthe ways in which tenure patterns themselvesevolve over time.

[Received August 1998;accepted December 1999.]

References

Belknap, J., and W.E. Saupe. “Farm FamilyResources and the Adoption of No-PlowTillage in Southwestern Wisconsin.” N. C. J.Agr. Econ. 10(January 1988):13–23.

Bills, N.L. Cropland Rental and Soil Conserva-tion in the United States. Washington DC: U.S.Department of Agriculture, ERS Agr. Econ.Rep. 529, March 1985.

Cheung, S. The Theory of Share Tenancy. Chicago:University of Chicago Press, 1969.

Day, J.C., C.L. Sandretto, W.D. McBride andV.E. Breneman. “Conservation Tillage in U.S.Corn Production: An Economic Appraisal.”Paper presented at the AAEA meeting, SaltLake City UT, 2–5 August 1998.

Ely, R.T., and G.S. Wehrwein. Land Economics.New York: Macmillan Co., 1940.

Esseks, J.D., and S.E. Kraft. “The Use of Conser-vation Practices by Part-Owner Operators.”Land Use Policy 6(January 1989):31–41.

Ervin, C.A., and D.E. Ervin. “Factors Affecting theUse of Soil Conservation Practices: Hypothe-ses, Evidence and Policy Implications.” LandEcon. 58(August 1982):277–91.

Featherstone, A.M., and B.K. Goodwin. “FactorsInfluencing a Farmer’s Decision to Investin Long-Term Conservation Improvements.”Land Econ. 69(February 1993):67–81.

Feder, G., and D.L. Umali. “The Adoption ofAgricultural Innovations: A Review.” Tech-nological Forecasting and Social Change43(May/June 1993):215–39.

Fuglie, K.O., and D.J. Bosch. “Economic and Envi-ronmental Implications of Soil Nitrogen Test-ing: A Switching Regression Analysis.” Amer.J. Agr. Econ. 77(November 1995):891–900.

Fuglie, K.O., and C.A. Klotz. “Adoption of Con-servation Tillage in the Lower SusquehannaBasin.” Paper presented at the NAREAmeeting, Newark DE, 27–29 June 1994.

Gould, B.W., W.E. Saupe, and R.M. Klemme.“Conservation Tillage: The Role of Farmand Operator Characteristics and the Percep-tion of Soil Erosion.” Land Econ. 65(May1989):167–82.

Hayami,Y., and K.Otsuka.The Economics of Con-tract Choice. Oxford: Clarendon, Press, 1993.

Heimlich, R.E. “Landownership and the Adoptionof Minimum Tillage: Comment.”Amer. J. Agr.Econ. 67(August 1985):679–381.

Hinman, H.R., S.G. Mohasci, and D.L. Young.“Impact of Tenure Status on Economic Incen-tives for Conservation Tillage.” J. Soil andWater Conserv. 38(May–June 1983):287–90.

Klemme, R.M. “A Stochastic Dominance Com-parison of Reduced Tillage Systems in Cornand Soybean Production under Risk.” Amer.J. Agr. Econ. 67(August 1985):550–57.

Kott, P.S.Using the Delete-A-Group Jackknife Vari-ance Estimator in NASS Surveys. Washington


DC: U.S. Department of Agriculture, NASSRep. RD–98–01, 1998.

Lee, L.K. “The Impact of Landownership Factorson Soil Conservation.” Amer. J. Agr. Econ.62(December 1980):1070–71.

Lee, L.K., and W.H. Stewart. “Landownership andthe Adoption of Minimum Tillage.” Amer. J.Agr. Econ. 65(May 1983):256–64.

Long, J.S. Regression Models for Categorical andLimited Dependent Variables. Thousand Oaks,CA: Sage Publications Inc., 1997.

Lynne, G.D., J.S. Shonkwiler, and L.R. Rola. “Atti-tudes and Farmer Conservation Behavior.”Amer. J. Agr. Econ. 70(February 1988):12–9.

McConnell, K.E. “An Economic Model of SoilConservation.” Amer. J. Agr. Econ. 65(Febru-ary 1983):83–9.

Miranowski, J., and M. Cochran. “Economics ofLand in Agriculture.” Agricultural and Envi-ronmental Resource Economics. G.A. Carlson,D. Zilberman and J.A. Miranowski, eds., pp.392–440. New York: Oxford University Press,1993.

Nielsen, E.G., J.A. Miranowski, and M.J. Morehart.Investments in Soil Conservation and LandImprovements: Factors Explaining Farmers’Decisions. Washington DC: U.S. Departmentof Agriculture, ERS Agr. Econ. Rep. 601,January 1989.

Norris, P.E., and S.S. Batie. “Virginia Farmers’Soil Conservation Decisions: An Applicationof Tobit Analysis.” S. J. Agr. Econ. 19(July1987):79–90.

Rahm, M.R. and W.E. Huffman. “The Adoption ofReduced Tillage: The Role of Human Capi-tal and Other Variables.” Amer. J. Agr. Econ.66(November 1984):405–13.

Ribaudo, M.O., and R.A. Shoemaker. “TheEffect of Feedgrain Program Participation onChemical Use.” Agric. Resource Econ. Rev.24(October 1995):211–20.

Robison, L.J., and P.J. Barry. The CompetitiveFirm’s Response to Risk. NewYork:MacmillanCo., 1987.

Rogers, D. Leasing Farmland in the United States.Washington DC: U.S. Department of Agricul-ture, ERS Rep. AGES–9159, 1991.

Scott, D.W., and G.Whittaker. “Multivariate Appli-cations of the ASH in Regression.” Com-munications in Statistics 25(November 1996):1521–30.

Stiglitz, J.E. “Incentives and Risk Sharing inSharecropping.” Rev. Econ. Studies 41(April1974):219–55.

Thompson, M. “No-till Reshapes Land Leases.”Farm J. (September 1994):11–12.

Wu, J., and B.A. Babcock. “The Choice ofTillage, Rotation, and Soil Testing Practices:Economic and Environmental Implications.”Amer. J. Agr. Econ. 80(August 1998):494–511.

Young, C.E., and J.S. Shortle. “Investments in SoilConservation Structures: The Role of Oper-ator and Operation Characteristics.” Agr.Econ. Res. 36(Spring 1984):10–15.

land tenure and the adoption of conservation practices

Documents