Relational Agreements & Rented Farmland: Implications for Agricultural Contracting and Land Stewardship
With a significant portion of farmland in the rental market, it is important to understand what type of impacts landowners and tenants have on the declining farmland soils. We know landlord-tenant relationships are structured through simple, legally enforceable contracts and self-enforcing handshake deals. However, previous literature has either not distinguished the contract structure or has applied the textbook assumption of full contract enforceability. With these assumptions in place, the tenant is not offered an incentive for unverifiable actions, such as displays of land stewardship. This thesis compares different contract structures using agency theory to present the influence on the tenant’s choice in effort in farming practices and land stewardship behaviour. This shows literature has been misguided and consequently has modeled the landlord-tenant relationship inaccurately. This thesis concludes with a recommendation for researchers to leverage relational contract theory in future research on the topic of farmland relationships.