A New Solution to the Puzzle of Fifty-Fifty Split in Sharecropping

Jiancai Pi

Economic Research-Ekonomska Istraživanja, 2013, vol. 26, issue 2, 141-152

Abstract: This paper mainly discusses the puzzle of fifty-fifty split in sharecropping through an improved principal-agent moral hazard framework. Greatly different from the existing literature, this paper finds a new solution to the puzzle of fifty-fifty split in sharecropping. Equal division between the landowner and the tenant regardless of the land’s fertility is incentive compatible, and at the same time the landowner could lease out more fertile land to the relational tenant to improve his utility by using the right of priority. Although fifty-fifty split in sharecropping happens to be fair and comes to be taken for granted as a norm, it is an efficient contractual arrangement in essence.

Date: 2013
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DOI: 10.1080/1331677X.2013.11517612

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