Abstract
The growing vertical integration of the agricultural sector presents opportunities for flexible incentives to reduce nonpoint-source pollution (NSP) of water. Some agricultural production contracts offer farmers incentives that may lead to environmental degradation due to high rates of agrochemical use. At the same time, some businesses are recognizing the advantages of using environmental responsibility for competitive advantage and are taking an interest in developing a reputation for environmental stewardship. Principal agent theory offers an economic framework with which to evaluate contract designs for acceptability according to both profitability and environmental criteria. A seed corn production contract illustrates the potential to use contracts to reduce nitrate leaching. This form of production contract also illustrates the key elements of acceptable contracts between processing companies and growers.
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Swinton, S.M., Chu, Mc., Batie, S.S. (1999). Agricultural Production Contracts to Reduce Water Pollution. In: Casey, F., Schmitz, A., Swinton, S., Zilberman, D. (eds) Flexible Incentives for the Adoption of Environmental Technologies in Agriculture. Natural Resource Management and Policy, vol 17. Springer, Dordrecht. https://doi.org/10.1007/978-94-011-4395-0_17
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DOI: https://doi.org/10.1007/978-94-011-4395-0_17
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