Douglas W. Allen

The Nature of the Farm

Using a model based on a trade‐off between moral hazard incentives and gains from specialization, this paper explains why farming has generally not converted from small, family‐based firms into large, factory‐style corporate firms. Nature is both seasonal and random, and the interplay of these qualities generates moral hazard, limits the gains from specialization, and causes timing problems between stages of production. By identifying conditions in which these forces vary, we derive testable predictions about the choice of organization and the extent of farm integration. To test these predictions we study the historical development of several agricultural industries and analyze data from a sample of over 1,000 farms in British Columbia and Louisiana. In general, seasonality and randomness so limit the benefits of specialization that family farms are optimal, but when farmers are successful in mitigating the effects of seasonality and random shocks to output, farm organizations gravitate toward factory processes and corporate ownership.

Transaction Costs and the Design of Cropshare Contracts

Modern cropshare contracts are explained using a model in which agents are risk neutral and contract rules are chosen to maximize expected joint wealth. It is shown that the farmer either bears the entire cost of inputs or shares the costs with the landowner in the same proportion as the output. The incentives of altering the cropshare percentage are examined and are used to derive implications about the portion of the crop that will be owned by the farmer. The model is tested and supported using data from a 1986 survey of farmers and landowners in Nebraska and South Dakota.

Welfare and the Family: The Canadian Experience

Canada has a universal social assistance program that is almost completely administered through the federal Canada Assistance Program. However, provinces determine the levels of assistance for various groups eligible for welfare. This article exploits the variation in payments and uses microdata to estimate the effect of changes in welfare benefits on welfare participation, single parenthood, births out of wedlock, divorce, and labor force participation among low-income women. In Canada, it would appear that welfare benefits influence these decisions.

No-fault divorce in Canada: Its cause and effect

Abstract The rise of no-fault divorce laws throughout the western world in the early 1970s is argued to be the result of a rise in the number of inefficient marriages during the 1940s–1960s. These marriages resulted in part from changes in the work force patterns of women that were unanticipated by men. The hypothesis is tested with Canadian data. In addition to this, further evidence is brought to bear on the effect of no-fault divorce on the divorce rate.

Order in the church: A property rights approach

This paper examines the organizational structure of Christian churches, and in doing treats churches as firms constrained by their theology. Like all firms, churches must manage opportunistic behaviour. The hypothesis of the paper is that the particular organizational structure of a given church is the result of transaction cost problems that arise in the production of its spiritual good. An effort to test the theory is made by examining the history of the church and examining cases of church failures and successes.

An inquiry into the state's role in marriage

The role of the state in the institution of marriage is explored. The author argues that government intervention in marriage is a means of avoiding large transaction costs between men and women. Such intervention is successful because marriage creates incentives that make private enforcement relatively costly and because marriages tend to be homogenous. The hypothesis is tested by examining U.S. state responses to changing divorce laws. The author concludes that such responses are consistent with the state increasing the social value of marriage by mitigating transaction costs.

Nontraditional Families and Childhood Progress Through School: A Comment on Rosenfeld

We reexamine Rosenfeld’s (2010) study on the association between child outcomes and same-sex family structure. Using the same data set, we replicate and generalize Rosenfeld’s findings and show that the implications of his study are different when using either alternative comparison groups or alternative sample restrictions. Compared with traditional married households, we find that children being raised by same-sex couples are 35 % less likely to make normal progress through school; this difference is statistically significant at the 1 % level.

Sex, Property Rights, and Divorce

This paper examines how differences in sex drives between husbands and wives affect bargaining strengths during marriage and particularly at times when divorce might occur. The basic argument follows from the fact that sex drives vary over an individuals life cycle, and are systematically different for men and women. The spouse having the lowest sex drive at any time in the marriage has a property right over whether or not sexual intercourse will occur, with a consequent increase in bargaining power at the margin. The paper derives a number of testable implications from its model, and, using several data sources, shows empirically how this difference affects marriage, adultery and divorce.

The Rhino’s Horn: Incomplete Property Rights and the Optimal Value of an Asset

Under certain conditions, it is possible for the costs of enforcing property rights to exceed their benefit for assets with high first‐best values. Under these conditions, previously privately held assets may revert to the public domain. This paper analyzes this prospect and considers attempts to lower the gross value of the asset as a possible method of maintaining the private property right. The paper examines several examples including built‐in obsolescence and penal colonies to demonstrate the general idea.

Property Rights, Transaction Costs, and Coase: One More Time

An author has a lot of nerve writing a paper on property rights, transaction costs, and Coase. Most economic undergraduates have heard at least one lecture on these subjects. Certainly most microeconomic textbooks treat all three topics to one extent or another, and there are articles with these words in their title if not ad infinitum then at least ad nauseam. Still, there often remains some confusion in both the texts and the articles2 as to what transaction costs are and how they relate to Coase and the Coase Theorem. There is also something less than unanimity over the importance of the Coase Theorem.3 As I have argued before, this confusion and debate stems from the lack of a meaningful definition of transaction costs. Since the definition I stated in 1991 has been slow to catch on, and since I still believe it is useful, and since I am a shameless self-promoter, I resurrect it here and make one more attempt to clear the air and make the notion of transaction costs operational. The proposed definition clarifies the Coase Theorem, draws attention to its importance, and helps to defend it against some standard criticisms. Further, the definition helps to answer sticky questions related to transaction costs, and to better understand the distinction between property rights and transaction costs.