On the Existence of Sharecropping

Kaniska Dam () and Daniel Ruiz Pérez
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Kaniska Dam: Division of Economics, CIDE

No DTE 502, Working Papers from CIDE, División de Economía

Abstract: When tenancy contracts are subject to ex-post limited liability, it is optimal for the landlord to offer the tenant the entire crop share since full incentive leads to higher production even in the bad state of the nature, which can be appropriated in the form of fixed rental payments. We show, in a simple model of incentive contracts where the tenant carries out multiple tasks, that effort substitution effect helps explain share tenancy even if there is limited liability in the ex-post sense.

Keywords: Sharecropping; incentive contracts (search for similar items in EconPapers)
JEL-codes: O31 (search for similar items in EconPapers)
Pages: 9 pages
Date: 2011-03
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