IDEAS home Printed from https://ideas.repec.org/a/oup/ajagec/v101y2019i4p1098-1114..html
   My bibliography  Save this article

Credit and Land Contracting: A Test of the Theory of Sharecropping

Author

Listed:
  • Narayan Das
  • Alain de Janvry
  • Elisabeth Sadoulet

Abstract

Choice of a share vs. fixed rent land rental contract has figured prominently in the theory of industrial organization. This theory tells us that, while a share contract is inefficient in a first-best world, it may be the preferred option under second-best conditions. It has thus predicted the existence of sharecropping as the potentially preferred contract under conditions of liquidity constraint. Rigorous empirical evidence is, however, still lacking on this basic contribution of theory. We use a randomized experiment in a credit program for landless workers and marginal farmers organized by BRAC in Bangladesh to show that increased access to credit has a large positive effect on the choice of fixed rent over share rent contracts, both in terms of number of contracts and area contracted. As predicted by theory, the magnitude of this shift away from sharecropping is enhanced when the tenant is less exposed to risk. Development programs that facilitate access to credit to potential tenants can thus help them take more efficient land rental contracts.

Suggested Citation

  • Narayan Das & Alain de Janvry & Elisabeth Sadoulet, 2019. "Credit and Land Contracting: A Test of the Theory of Sharecropping," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 101(4), pages 1098-1114.
    • Handle: RePEc:oup:ajagec:v:101:y:2019:i:4:p:1098-1114.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/ajae/aaz005
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jon Reiersen, 2004. "Status and Incentives," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 30, pages 121-128.
    2. Hanan G. Jacoby & Ghazala Mansuri, 2008. "Land Tenancy and Non-Contractible Investment in Rural Pakistan," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 75(3), pages 763-788.
    3. Ananish Chaudhuri & Pushkar Maitra, 1997. "Determinants of Land Tenure Contracts; Theory and Evidence from Rural India," Departmental Working Papers 199710, Rutgers University, Department of Economics.
    4. Raihan, Selim & Fatehin, Sohani & Haque, Ifthekharul, 2009. "Access to land and other natural resources by the rural poor: the case of Bangladesh," MPRA Paper 38621, University Library of Munich, Germany.
    5. Bruno Crépon & Florencia Devoto & Esther Duflo & William Parienté, 2015. "Estimating the Impact of Microcredit on Those Who Take It Up: Evidence from a Randomized Experiment in Morocco," American Economic Journal: Applied Economics, American Economic Association, vol. 7(1), pages 123-150, January.
    6. Quibria, M. G. & Rashid, Salim, 1984. "The puzzle of sharecropping: A survey of theories," World Development, Elsevier, vol. 12(2), pages 103-114, February.
    7. Arcand, Jean-Louis & Ai, Chunrong & Ethier, Francois, 2007. "Moral hazard and Marshallian inefficiency: Evidence from Tunisia," Journal of Development Economics, Elsevier, vol. 83(2), pages 411-445, July.
    8. Seiichi Fukui, 1997. "The Meaning of Kinship in Sharecropping Contracts," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 394-406.
    9. Abhijit Banerjee & Esther Duflo & Rachel Glennerster & Cynthia Kinnan, 2015. "The Miracle of Microfinance? Evidence from a Randomized Evaluation," American Economic Journal: Applied Economics, American Economic Association, vol. 7(1), pages 22-53, January.
    10. Alessandro Tarozzi & Jaikishan Desai & Kristin Johnson, 2015. "The Impacts of Microcredit: Evidence from Ethiopia," American Economic Journal: Applied Economics, American Economic Association, vol. 7(1), pages 54-89, January.
    11. Shaban, Radwan Ali, 1987. "Testing between Competing Models of Sharecropping," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 893-920, October.
    12. Eswaran, Mukesh & Kotwal, Ashok, 1985. "A Theory of Contractual Structure in Agriculture," American Economic Review, American Economic Association, vol. 75(3), pages 352-367, June.
    13. Jabbar, M. A., 1978. "Conceptual issues related to classification of land tenure systems in Bangladesh," Bangladesh Journal of Agricultural Economics, Bangladesh Agricultural University, vol. 1(1).
    14. Evans, Timothy G. & Adams, Alayne M. & Mohammed, Rafi & Norris, Alison H., 1999. "Demystifying Nonparticipation in Microcredit: A Population-Based Analysis," World Development, Elsevier, vol. 27(2), pages 419-430, February.
    15. repec:syd:wpaper:9710 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Alain de Janvry & Elisabeth Sadoulet, 2019. "Transforming developing country agriculture: Removing adoption constraints and promoting inclusive value chain development," Working Papers hal-02287668, HAL.
    2. de Janvry, Alain & Sadoulet, Elisabeth, 2020. "Using agriculture for development: Supply- and demand-side approaches," World Development, Elsevier, vol. 133(C).
    3. Yuxuan Xu & Jie Lyu & Ying Xue & Hongbin Liu, 2022. "Intentions of Farmers to Renew Productive Agricultural Service Contracts Using the Theory of Planned Behavior: An Empirical Study in Northeastern China," Agriculture, MDPI, vol. 12(9), pages 1-21, September.
    4. Cao, Yueming & Bai, Yunli & Zhang, Linxiu, 2021. "Plot Size, Adjacency, and Farmland Rental Contract Choice," 2021 Conference, August 17-31, 2021, Virtual 315378, International Association of Agricultural Economists.
    5. Yueming Cao & Yunli Bai & Linxiu Zhang, 2022. "Plot Size, Adjacency, and Farmland Rental Contract Choice," Land, MDPI, vol. 11(4), pages 1-21, April.
    6. He, Yiming & Collins, Alan R., 2021. "The effect of information structure on farmland contractual choice: toward a revised theory of share tenancy with new evidence from Guangdong, China," International Review of Law and Economics, Elsevier, vol. 65(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nasim, Sanval & Helfand, Steven & Dinar, Ariel, 2020. "Groundwater management under heterogeneous land tenure arrangements," Resource and Energy Economics, Elsevier, vol. 62(C).
    2. Lucia Dalla Pellegrina & Giorgio Di Maio & Paolo Landoni & Emanuele Rusinà, 2021. "Money management and entrepreneurial training in microfinance: impact on beneficiaries and institutions," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 38(3), pages 1049-1085, October.
    3. Bidisha, Sayema Haque & Hossain, Md. Amzad & Alam, Rubaiyat & Hasan, Md. Mehedi, 2018. "Credit, tenancy choice and agricultural efficiency: Evidence from the northern region of Bangladesh," Economic Analysis and Policy, Elsevier, vol. 57(C), pages 22-32.
    4. Jacoby, Hanan G. & Mansuri, Ghazala, 2009. "Incentives, supervision, and sharecropper productivity," Journal of Development Economics, Elsevier, vol. 88(2), pages 232-241, March.
    5. Deininger, Klaus & Ali, Daniel Ayalew & Alemu, Tekie, 2011. "Productivity effects of land rental markets in Ethiopia : Evidence from a matched tenant-landlord sample," Policy Research Working Paper Series 5727, The World Bank.
    6. Emily Breza & Cynthia Kinnan, 2021. "Measuring the Equilibrium Impacts of Credit: Evidence from the Indian Microfinance Crisis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 136(3), pages 1447-1497.
    7. Abhijit Banerjee & Emily Breza & Esther Duflo & Cynthia Kinnan, 2019. "Can Microfinance Unlock a Poverty Trap for Some Entrepreneurs?," NBER Working Papers 26346, National Bureau of Economic Research, Inc.
    8. Daniel Bjorkegren & Joshua Blumenstock & Omowunmi Folajimi-Senjobi & Jacqueline Mauro & Suraj R. Nair, 2022. "Instant Loans Can Lift Subjective Well-Being: A Randomized Evaluation of Digital Credit in Nigeria," Papers 2202.13540, arXiv.org.
    9. Pedro Carneiro & Sokbae Lee & Daniel Wilhelm, 2020. "Optimal data collection for randomized control trials," The Econometrics Journal, Royal Economic Society, vol. 23(1), pages 1-31.
    10. Gyorgy Molnar & Attila Havas, 2019. "Escaping from the poverty trap with social innovation: a social microcredit programme in Hungary," CERS-IE WORKING PAPERS 1912, Institute of Economics, Centre for Economic and Regional Studies.
    11. Tamara Broderick & Ryan Giordano & Rachael Meager, 2020. "An Automatic Finite-Sample Robustness Metric: When Can Dropping a Little Data Make a Big Difference?," Papers 2011.14999, arXiv.org, revised Jul 2023.
    12. Paolo Casini & Lore Vandewalle & Zaki Wahhaj, 2017. "Public Good Provision in Indian Rural Areas: The Returns to Collective Action by Microfinance Groups," The World Bank Economic Review, World Bank, vol. 31(1), pages 97-128.
    13. Mekdim D. Regassa & Mohammed B. Degnet & Mequanint B. Melesse, 2023. "Access to credit and heterogeneous effects on agricultural technology adoption: Evidence from large rural surveys in Ethiopia," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 71(2), pages 231-253, June.
    14. Oriana Bandiera & Robin Burgess & Erika Deserranno & Ricardo Morel & Imran Rasul & Munshi Sulaiman & Jack Thiemel, 2022. "Microfinance and Diversification," Economica, London School of Economics and Political Science, vol. 89(S1), pages 239-275, June.
    15. Mathilde Maîtrot & Miguel Niño-Zarazúa, 2017. "Poverty and wellbeing impacts of microfinance: What do we know?," WIDER Working Paper Series wp-2017-190, World Institute for Development Economic Research (UNU-WIDER).
    16. Diego Vera-Cossio, 2022. "Targeting Credit through Community Members," Journal of the European Economic Association, European Economic Association, vol. 20(2), pages 778-821.
    17. Zenou, Yves & Jellal, Mohamed, 2005. "Ethnic Diversity, Market Structure and Risk Sharing in Developing Countries," CEPR Discussion Papers 5366, C.E.P.R. Discussion Papers.
    18. Ananish Chaudhuri, 1997. "A Dynamic Model of Contractual Choice in Tenancy," Departmental Working Papers 199711, Rutgers University, Department of Economics.
    19. Elikplimi K. Agbloyor & Simplice A. Asongu & Peter Muriu, 2021. "Sustainability, Growth and Impact of MFIs in Africa," Working Papers of the African Governance and Development Institute. 21/083, African Governance and Development Institute..
    20. Alem, Yonas & Ruhinduka, Remidius D., 2020. "Saving Africa's tropical forests through energy transition: A randomized controlled trial in Tanzania," Ruhr Economic Papers 885, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:ajagec:v:101:y:2019:i:4:p:1098-1114.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/aaeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.