Moral Hazard: Experimental Evidence from Tenancy Contracts

Konrad Burchardi (), Selim Gulesci (), Benedetta Lerva and Munshi Sulaiman

No 12232, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Agricultural productivity is particularly low in developing countries. Output sharing rules that make farmers less-than-full residual claimants of their produce are seen as one of the main drivers of low agricultural productivity. We report results from a field experiment designed to estimate and understand the effects of sharecropping contracts on agricultural input choices, risk-taking, and output. The experiment induced variation in the terms of sharecropping contracts. After agreeing to pay 50% of their output to the landlord, tenants were randomized into three groups: (i) some kept 50% of their output; (ii) others kept 75%; (iii) others kept 50% of output and received a lump sum payment at the end of their contract, either fixed or stochastic. We find that tenants with higher output shares utilized more inputs, cultivated riskier crops, and produced 60% more output relative to control. Income or risk exposure have at most a small effect on farm output; the increase in output should be interpreted as an incentive effect of the output sharing rule.

Keywords: Agricultural productivity; Contracts; Incentive effects; Sharecropping (search for similar items in EconPapers)
JEL-codes: C93 D22 O13 (search for similar items in EconPapers)
Date: 2017-08
New Economics Papers: this item is included in nep-agr, nep-cta, nep-exp and nep-hrm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Moral Hazard: Experimental Evidence from Tenancy Contracts (2019)
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