Three theoretical essays on the internal organization of agrarian firms: The farm family size decisions and the choice of land tenancy contracts.

Abstract

Based on the fact that a negative correlation exists between farm population and farm size, this work focus on farm population change and farmland mobility. Since there is a high degree of occupational inheritance in agriculture and the age profile of farm outmigration is U-shaped, the first two essays take up two important decisions underlying the process of farm population change: (1) fertility decisions; (2) offspring household membership decisions. The first decision is formulated as a stochastic programming model with a closed form solution for the intensity of birth control, the distribution of the birth spacings and the moment generating function of the expected family size. These results give an explanation for the "stalled fertility transition" and the "rural-urban fertility differentials" and are consistent with the "old age security hypothesis" and the "Caldwell's hypothesis". The farm offspring household membership decision is viewed as a "research project" where the offspring invests in human and non human capital to influence the probability of finding an alternative to the life in the parental household. The problem is formulated as a differential game between a selfish offspring and altruistic parents. The solution is consistent with some "stylized facts" such as the "flexibility of inheritance systems" and the "generational fragmentation" of the family property when the economic opportunities expand outside the parental household. Intrafamilial transfers and land tenancy transactions are, by far, the most important processes of farmland mobility. Having dealt with the intrafamilial transfers in the second essay, the third one takes up the issue of land tenancy. These contracts are modeled as a pairwise bargaining game in extensive form, embedded in an idiosyncratic market with exogenous search intensities, assortive matching and outside options corresponding to the possibility each player has to find an alternative partner. The probability of this event depends on the number of agents in the two sides of the market and establishes a linkage between farm demography and tenancy choices. The surplus sharing rules resulting from the perfect equilibrium strategies show how the contracts are tailored to fit the characteristics of the "relative bargaining powers" of the parties.