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Eviction threats and investment incentives

Abhijit Banerjee and Maitreesh Ghatak ()

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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)
JEL-codes: O12 D82 D23 Q15 (search for similar items in EconPapers)
Date: 2003-06
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http://eprints.lse.ac.uk/6643/ Open access version. (application/pdf)

Related works:
Journal Article: Eviction threats and investment incentives (2004) Downloads
Working Paper: Eviction Threats and Investment Incentives (2003) Downloads
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