Revisiting the tenancy-inefficiency question with an inter-temporal optimisation framework: insights from the agrarian set-up of Assam Plains in Eastern India

Traditionally the tenancy-inefficiency debate is centred on the incentive problem of sharecroppers that induce them to under-supply inputs and effort in cultivation. The fixed-rent tenants are supposed to be free from this problem as the rents they pay are in the nature of fixed costs and hence do not enter marginal calculations. The present paper argues that even the fixed-rent tenants can have an incentive problem, albeit of the opposite type, if an inter-temporal optimisation framework is adopted. They may be inclined to use production-enhancing inputs like chemical fertilisers excessively so as to maximise returns from the land during their tenure, disregarding the implication of their action for long-term soil health. For empirical verification of the argument, the authors analyse survey data from Assam Plains, where land holders of all size class actively participate in the land lease market. While the sharecroppers have been expectedly found to use land less intensively than the owner operators, the fixed-rent tenants are seen using land much more intensively which can impair soil health in the longer run. Suitable reforms of the prevailing agrarian institutions have been called for to address the incentive problems of both sharecroppers and fixed-rent tenants.