The nature and drivers of contracts in cattle herding and management: The case of Ghana

Abstract We study the characteristics of contracts in cattle production in Ghana and explain variations in contract type using agency and transaction cost theory. In their study of pastoral groups, especially those in West Africa, anthropologists have distinguished between two categories of contracts in cattle production: cattle owner–herd manager contracts and herd manager–herdsman contracts. However, few studies have analysed the variations in contract type within each category. Using survey data from 342 cattle kraal owners, we explored the contract types under the two contract categories and analysed their drivers using crosstabulations. Contract types in each category can be explicit, with the reward given by the principal explicitly specified, or implicit and unspecified. Environmental uncertainty was associated with implicit contracts while for explicit contracts, kraal owners’ outside options or opportunity cost for monitoring was associated with fixed-wage contracts, subsidy-only contracts, and input contribution by kraal owners. The combination of moral hazard and measurement costs explained whether herdsmen were familial and not paid with milk or hired and paid with milk. Our findings provide further insights into the drivers of contract type.