Evidence on the Incentive Properties of Share Contracts

Luis Braido ()

Development and Comp Systems from University Library of Munich, Germany

Abstract: Ever since Adam Smith, share contracts have been condemned for their lack of incentives. Sharecropping tenants face incentives to undersupply productive inputs since they receive only a fraction of the marginal revenue. The empirical literature reports that lands under sharecropping are less productive and employ inputs less intensively than those operated by owners. This paper shows that: (i) share contracts are also associated with lower-quality lands; (ii) the sharecroppers' input choices satisfy profit-maximization conditions; and (iii) the contract form does not affect farm productivity conditional on land quality and input use. These findings suggest that farmers optimally choose to employ inputs less intensively in lower-quality lands under sharecropping and, then, these lands end up being less productive. Land- quality selection bias (as opposite to incentives) seems to be behind the existing evidence on the productive disadvantage of share contracts.

Keywords: Econometric test; moral hazard; development; tenancy data; selection bias (search for similar items in EconPapers)
JEL-codes: C52 D82 O12 Q15 (search for similar items in EconPapers)
Date: 2005-08-30
New Economics Papers: this item is included in nep-agr
Note: Type of Document - pdf
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Evidence on the Incentive Properties of Share Contracts (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpdc:0508013

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