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Cost-Sharing Arrangements under Sharecropping: Moral Hazard, Incentive Flexibility, and Risk

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  • Avishay Braverman
  • Joseph E. Stiglitz

Abstract

This paper explains the rationale and describes the characteristics of cost sharing arrangements in rural developing economies, focusing on the risk and incentive properties of alternative cost contracts and on their flexibility—their ability to adapt to environmental changes. It is shown that where labor inputs are difficult to monitor, the rule that cost shares and output shares be equalized will not hold and is not "constrained pareto efficient," and that cost-sharing contracts have a decided advantage over contracts which specify the level of inputs whenever there are asymmetries of information regarding production technology between the landlord and the tenant.

Suggested Citation

  • Avishay Braverman & Joseph E. Stiglitz, 1986. "Cost-Sharing Arrangements under Sharecropping: Moral Hazard, Incentive Flexibility, and Risk," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(3), pages 642-652.
    • Handle: RePEc:oup:ajagec:v:68:y:1986:i:3:p:642-652.
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    Citations

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    Cited by:

    1. Novak, Frank S. & Hornbaker, Robert H., 1987. "Impacts of Lease and Tenure Arrangements on Landlords and Farm Operators," 1987 Annual Meeting, August 2-5, East Lansing, Michigan 270134, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Gagliardi, Francesca, 2008. "Institutions and economic change: A critical survey of the new institutional approaches and empirical evidence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(1), pages 416-443, February.
    3. Duarte N. Leite & Sandra T. Silva & Oscar Afonso, 2014. "Institutions, Economics And The Development Quest," Journal of Economic Surveys, Wiley Blackwell, vol. 28(3), pages 491-515, July.
    4. 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.
    5. Burnett, J. Wesley & Szmurlo, Daniel & Callahan, Scott, 2024. "Farmland Rental and Conservation Practice Adoption," Economic Information Bulletin 341821, United States Department of Agriculture, Economic Research Service.
    6. Kourtesi, Sofia & De Witte, Kristof & Polymeros, Apostolos, 2016. "Technical Efficiency in the Agricultural Sector - Evidence from a Conditional Quantile-Based Approach," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 17(2), June.
    7. Agrawal, Pradeep, 1999. "Contractual structure in agriculture," Journal of Economic Behavior & Organization, Elsevier, vol. 39(3), pages 293-325, July.
    8. Wang, Sen & van Kooten, G. Cornelis & Wilson, Bill, 2000. "Remuneration for silviculture in British Columbia: insights from transaction cost economics," Forest Policy and Economics, Elsevier, vol. 1(1), pages 71-79, May.
    9. Schoney, R. A., 1990. "An Analysis of Wheat Supply Response Under Risk and Uncertainty," Working Papers 244030, Agriculture and Agri-Food Canada.
    10. KOUNDOURI Phoebe & NAUGES Céline & TZOUVELEKAS Vangelis, 2009. "The Effect Of Production Uncertainty And Information Dissemination On The Diffusion Of Irrigation Technologies," LERNA Working Papers 09.06.282, LERNA, University of Toulouse.
    11. M. A. Taslim, 1992. "A Survey of Theories of Cropshare Tenancy," The Economic Record, The Economic Society of Australia, vol. 68(3), pages 254-275, September.
    12. Dubois, Pierre, 2002. "Moral hazard, land fertility and sharecropping in a rural area of the Philippines," Journal of Development Economics, Elsevier, vol. 68(1), pages 35-64, June.
    13. Rambonilaza, Mbolatiana, 2004. "Normes sociales et productivité dans le processus d’appariement des contrats agricoles," L'Actualité Economique, Société Canadienne de Science Economique, vol. 80(4), pages 571-592, Décembre.
    14. Stiglitz, Joseph E., 2018. "Pareto efficient taxation and expenditures: Pre- and re-distribution," Journal of Public Economics, Elsevier, vol. 162(C), pages 101-119.
    15. Matthiasson, Thorolfur, 1999. "Cost sharing and catch sharing," Journal of Development Economics, Elsevier, vol. 58(1), pages 25-44, February.
    16. Fafchamps, Marcel, 2010. "Vulnerability, risk management and agricultural development," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 5(1), pages 1-18, September.
    17. Islam, Roumeen, 2003. "do more transparent government govern better?," Policy Research Working Paper Series 3077, The World Bank.
    18. Ai, Chunrong & Arcand, Jean-Louis & Éthier, François, 1998. "Inefficacité marshallienne, partage de coûts et modèles contractuels avec marchés manquants," L'Actualité Economique, Société Canadienne de Science Economique, vol. 74(3), pages 315-341, septembre.
    19. Jean-Philippe Colin & Emmanuelle Bouquet, 2001. "Le métayage comme partenariat. L'arrangement a médias dans la Sierra Madré orientale," Économie rurale, Programme National Persée, vol. 261(1), pages 77-92.
    20. Nasim, Sanval & Helfand, Steven & Dinar, Ariel, 2020. "Groundwater management under heterogeneous land tenure arrangements," Resource and Energy Economics, Elsevier, vol. 62(C).
    21. Zeng, Di & Alwang, Jeffrey & Norton, George & Jaleta, Moti & Shiferaw, Bekele & Yirga, Chilot, 2018. "Land ownership and technology adoption revisited: Improved maize varieties in Ethiopia," Land Use Policy, Elsevier, vol. 72(C), pages 270-279.
    22. Robert Townsend & Rolf Mueller, 1998. "Mechanism Design and Village Economies: From Credit, to Tenancy, to Cropping Groups," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 119-172, January.
    23. Pietrobon, Davide, 2024. "The dual role of insurance in input use: Mitigating risk versus curtailing incentives," Journal of Development Economics, Elsevier, vol. 166(C).

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