Epsilon Open Archive

Abstract

Most communist economies were dominated by large collective farms. Today, smaller family farms often coexist with larger corporate and collective farms in these countries. The roles of other-regarding preferences and social norms have been largely neglected in the debate on farmers’ organizational choices. We conducted lab-in-the-field ultimatum game experiments with 397 cotton farmers from collective and family farms. Large and statistically significant differences existed in the rejection behavior among the two farm types. Punishment of unfair behavior explained organizational choice, both with and without controlling for other factors. We conclude that the continuation of dual farm structures requires tailored policy support.