Methods of Estimating Returns 



The following expressions represent the procedure used to compute returns 

 to land and labor under crop share arrangements In flue-cured tobacco pro- 

 duction: 



(1) R - Jpq - jCi - c 2 - v 



(2) L - (1-j) pq - (1-j) Cl - c 3 + v 



where: 



R - Return per acre to landowner 

 L ■ Labor earnings per hour 

 p ■ Price of tobacco 

 q ■ Quantity cf tobacco produced 

 j * Nominal share to landlord 



c^ « Shared costs 



C£ * Landlord costs 



C3 ■ Tenant or cropper costs 

 v * Value of perquisites 7/ 

 a ■ Acres of tobacco 



(1-j) «■ Nominal share to tenant or cropper h * Hours of labor. 



In equation (1), income per acre to land is expressed as the share of 

 gross income received by the landowner, less his costs, which include the value 

 of perquisites provided the cropper. Similarly, in equation (2), income to 

 labor is expressed as the share of the gross receipts received by the cropper, 

 less his costs and plus the value of perquisites provided by the landowners. 



These equations do not isolate managerial returns to landowners or tenants. 

 The landowner typically performs the managerial service on a cropper farm, so 

 his net return includes shares to both land and management. The tenant usually 

 performs the managerial service on the farm he operates, and his net returns 

 Include shares to both labor and management „ Thus, returns to management may 

 be estimated from either (1) the difference between landowner returns on 

 cropper farms and landowner returns on tenant-operated farms, or (2) the 

 difference between net returns to croppers and tenants. The second procedure 

 assme 8 that Income to the cropper is a return to labor only. Possible ex- 

 ceptions to this assumption are discussed later 1? the report. 



2,1 Perquisites represent the overhead cost to the landlord for the house, 

 garden, pasture, and firewood which the landlord typically provides without 

 charge to the cropper or tenant. These costs include both cash outlays and 

 opportunity returns that could be earned in the absence of a cropper arrange- 

 ment. The perquisites are returns to the cropper since the cropper would have 

 to otherwise pay for these provisions. 



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