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Eviction Threats and Investment Incentives

Abhijit Banerjee and Maitreesh Ghatak ()

STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers from Suntory and Toyota International Centres for Economics and Related Disciplines, LSE

Abstract: We show that the effect of eviction threats on unobservable investment effort can be positive. We demonstrate this apparently counter-intuitive result in a model of tenancy where investment by a tenant in the current period raises the chances of doing well in the next period, and therefore retaining the job in the period after next period. If the tenant earns rents, the landlord can partly substitute eviction threats for the crop share as an incentive device. This makes it more attractive for him to elicit investment effort. However, there is a direct negative effect of eviction threats on the tenant's discount factor. We find conditions under which the former effect dominates and eviction threats can increase investment incentives.

Keywords: Sharecropping tenancy; eviction threats; investment incentives. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr
Date: 2003-06
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Journal Article: Eviction threats and investment incentives (2004) Downloads
Working Paper: Eviction threats and investment incentives (2003) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:cep:stidep:39

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