Unfair Incentives: A Behavioral Note on Sharecropping

Heiner Schumacher and Niels Kemper

VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy from Verein für Socialpolitik / German Economic Association

Abstract: We conducted a field experiment with real-life tenants in Ethiopia to test the incentive effects of fixed-wage, sharecropping, fixed-rent, and ownership contracts. The experimental task resembles a common process in agricultural production. The sharecropping contract is essentially a piece-rate scheme framed as a profit sharing agreement. The sharecropping output was about 11 percent smaller than the fixed-rent output. Surprisingly, it is statistically indistinguishable from the fixed-wage output, despite substantial piece rates. This effect is driven by real-life sharecroppers. Their sharecropping output was significantly smaller than that of non-sharecroppers, and in one region, it was even 10 percent lower than sharecroppers fixed-wage output. Based on qualitative interviews and historical accounts, we argue that our subjects dislike sharecropping contracts because of the unfair profit sharing and the controversial allocation of the land. The contractual performance may therefore depend on the perceived fairness of the incentive scheme.

JEL-codes: C93 J30 N50 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-agr, nep-exp and nep-hrm
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Related works:
Journal Article: Unfair incentives: A behavioural note on sharecropping (2018)
Working Paper: Unfair incentives: A behavioural note on sharecropping (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc15:112860

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