We empirically test separation of ownership and control (SOC) and the interaction of SOC with farmer effort on farm success using data from the U.S. Department of Agriculture's Agricultural Resource Management Survey. We use a two-stage least-squares approach with instrumental variables that proxy for participation constraints in binding incentive contracts. We find that the interaction has a significantly positive effect on success for grain farms and an insignificant effect for livestock farms. The results are consistent with hypotheses by Allen and Lueck (1998), but our model predicts that farms with SOC are likely to be more successful than farms without SOC despite exogenous uncertainty and agency costs.

Impediments to agricultural change extend beyond lack of appropriate research and the federal farm program to addiction to use of agricultural chemicals. Several recent trends in American agriculture have been caused by or have resulted in dependence on agricultural chemicals. They include the continuing separation of livestock from farms, farm size, separation of ownership and farming of the land, discontinuity of learned procedures, part-time farming, and certain aspects of noxious perennial weeds. This implies that prospects for agricultural change are related to the trends with which they are associated.