Revisiting the Eswaran-Kotwal Model of Tenancy

Maitreesh Ghatak and Dilip Mookherjee

Studies in Microeconomics, 2024, vol. 12, issue 1, 32-58

Abstract: Persistence of sharecropping tenancy, and increases in farm productivity resulting from regulations protecting tenant rights have been observed in many developing countries. This paper examines if these can be explained by alternative models of sharecropping with two sided efforts/investments, namely, complete contract models, either without wealth constraints ( Eswaran-Kotwal, 1985 ) or with a wealth constrained tenant ( Mookherjee, 1997 ; Banerjee-Gertler-Ghatak, 2002 ), and incomplete contract holdup models without wealth constraints (Grossman Hart, 1986). In the absence of wealth constraints, the complete contract model always results in (incentive constrained) surplus-maximizing productivity; thus, there can be no scope for tenancy regulations to raise productivity. In the incomplete contract model, tenancy regulations would raise productivity only if the tenant’s investments are more important than the landlord’s investment. But in that case, sharecropping tenancy would not persist in the absence of wealth constraints, as the tenant would have purchased the land right ex ante from the landlord. The model with wealth constraints helps explain both the persistence of tenancy and the productivity/surplus enhancing effects of tenancy regulations. JEL Classifications: D02, D23, OI2, OI3

Keywords: Sharecropping; tenancy regulations; productivity; contracts; incentives (search for similar items in EconPapers)
Date: 2024
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Working Paper: Revisiting the Eswaran-Kotwal model of tenancy (2024)
Working Paper: Revisiting the Eswaran-Kotwal Model of Tenancy (2023)
Working Paper: Revisiting the Eswaran-Kotwal Model of Tenancy (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:sae:miceco:v:12:y:2024:i:1:p:32-58

DOI: 10.1177/23210222241231700

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