IDEAS home Printed from https://ideas.repec.org/p/hhs/nlsclt/2018_002.html
   My bibliography  Save this paper

Variation in Output Shares and Endogenous Matching in Land Rental Contracts

Author

Listed:
  • Brhanu , Desta

    (Mekelle University)

  • Holden , Stein T.

    (Centre for Land Tenure Studies, Norwegian University of Life Sciences)

Abstract

We investigate the extent of variation in output sharing in land rental contracts and alternative hypotheses to explain this variation. Close to half of the rental contracts in our study in northern Ethiopia have output shares that deviate from the dominant 50-50 equal sharing. Variation in land quality, the relative bargaining power of landlords and tenants, production risks and shocks are hypothesized to influence output shares. Matched data of landlords and tenants are used. The importance of endogenous matching of landlords and tenants is investigated by assessing how endogenous tenant characteristics are correlated with landlord characteristics. We find evidence of negative assortative matching for key resource characteristics. A control function approach is used to control for endogenous matching in the output share models. The results reveal that production risks as well as relative bargaining power affect output shares in the reverse tenancy setting with tenants being relatively wealthier and influential than landlords.

Suggested Citation

  • Brhanu , Desta & Holden , Stein T., 2018. "Variation in Output Shares and Endogenous Matching in Land Rental Contracts," CLTS Working Papers 2/18, Norwegian University of Life Sciences, Centre for Land Tenure Studies, revised 16 Oct 2019.
    • Handle: RePEc:hhs:nlsclt:2018_002
    as

    Download full text from publisher

    File URL: https://www.nmbu.no/download/file/fid/40399
    File Function: Full text
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Joseph E. Stiglitz, 1974. "Incentives and Risk Sharing in Sharecropping," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(2), pages 219-255.
    2. Douglas W. Allen & Dean Lueck, 1993. "Transaction Costs and the Design of Cropshare Contracts," RAND Journal of Economics, The RAND Corporation, vol. 24(1), pages 78-100, Spring.
    3. Daniel A. Ackerberg & Maristella Botticini, 2002. "Endogenous Matching and the Empirical Determinants of Contract Form," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 564-591, June.
    4. Sugato Bhattacharyya & Francine Lafontaine, 1995. "Double-Sided Moral Hazard and the Nature of Share Contracts," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 761-781, Winter.
    5. Deininger, Klaus & Ali, Daniel Ayalew & Holden, Stein & Zevenbergen, Jaap, 2008. "Rural Land Certification in Ethiopia: Process, Initial Impact, and Implications for Other African Countries," World Development, Elsevier, vol. 36(10), pages 1786-1812, October.
    6. Ghebru, Hosaena & Holden, Stein, 2013. "Links between Tenure Security and Food Security: Evidence from Ethiopia," CLTS Working Papers 2/13, Norwegian University of Life Sciences, Centre for Land Tenure Studies, revised 10 Oct 2019.
    7. Peter Murrell, 1983. "The Economics of Sharing: A Transactions Costs Analysis of Contractual Choice in Farming," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 283-293, Spring.
    8. Jean-Jacques Laffont & Mohamed Salah Matoussi, 1995. "Moral Hazard, Financial Constraints and Sharecropping in El Oulja," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(3), pages 381-399.
    9. Stein T. Holden & Hosaena Ghebru, 2013. "Welfare Impacts of Land Certification in Tigray, Ethiopia," Palgrave Macmillan Books, in: Stein T. Holden & Keijiro Otsuka & Klaus Deininger (ed.), Land Tenure Reform in Asia and Africa, chapter 6, pages 137-161, Palgrave Macmillan.
    10. Allen, Franklin, 1985. "On the Fixed Nature of Sharecropping Contracts," Economic Journal, Royal Economic Society, vol. 95(377), pages 30-48, March.
    11. Hosaena H. Ghebru & Stein T. Holden, 2015. "Reverse-Share-Tenancy and Agricultural Efficiency: Farm-Level Evidence from Ethiopia," Journal of African Economies, Centre for the Study of African Economies, vol. 24(1), pages 148-171.
    12. Otsuka, Keijiro & Chuma, Hiroyuki & Hayami, Yujiro, 1992. "Land and Labor Contracts in Agrarian Economies: Theories and Facts," Journal of Economic Literature, American Economic Association, vol. 30(4), pages 1965-2018, December.
    13. William E. James & James A. Roumasset, 1979. "Explaining Variations In Share Contracts: Land Quality, Population Pressure And Technological Change," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 23(2), pages 116-127, August.
    14. Stein T. Holden & Keijiro Otsuka & Klaus Deininger (ed.), 2013. "Land Tenure Reform in Asia and Africa," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-137-34381-9, December.
    15. Kikuchi, Masao & Hayami, Yujiro, 1980. "Inducements to Institutional Innovations in an Agrarian Community," Economic Development and Cultural Change, University of Chicago Press, vol. 29(1), pages 21-36, October.
    16. Rao, C H Hanumantha, 1971. "Uncertainty, Entrepreneurship, and Sharecropping in India," Journal of Political Economy, University of Chicago Press, vol. 79(3), pages 578-595, May-June.
    17. Marc F. Bellemare, 2012. "Insecure Land Rights and Share Tenancy: Evidence from Madagascar," Land Economics, University of Wisconsin Press, vol. 88(1), pages 155-180.
    18. Gebrehaweria Gebregziabher & Stein T. Holden, 2011. "Distress rentals and the land rental market as a safety net: contract choice evidence from Tigray, Ethiopia," Agricultural Economics, International Association of Agricultural Economists, vol. 42, pages 45-60, November.
    19. Chao, Kang, 1983. "Tenure Systems in Traditional China," Economic Development and Cultural Change, University of Chicago Press, vol. 31(2), pages 295-314, January.
    20. David M. G. Newbery, 1977. "Risk Sharing, Sharecropping and Uncertain Labour Markets," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 585-594.
    21. Stein Holden & Klaus Deininger & Hosaena Ghebru, 2011. "Tenure Insecurity, Gender, Low-cost Land Certification and Land Rental Market Participation in Ethiopia," Journal of Development Studies, Taylor & Francis Journals, vol. 47(1), pages 31-47.
    22. H. Peyton Young & Mary A. Burke, 2001. "Competition and Custom in Economic Contracts: A Case Study of Illinois Agriculture," American Economic Review, American Economic Association, vol. 91(3), pages 559-573, June.
    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. Ting Zhang & Ke Huang & Anlu Zhang, 2021. "Choice of Rural Collective Construction Land Sales and Rental Markets at the Theoretical Framework of Williamson’s Transaction Costs: Evidence from Nanhai District, Guangdong Province, China," Sustainability, MDPI, vol. 13(15), pages 1-16, July.
    2. Nasim, Sanval & Helfand, Steven & Dinar, Ariel, 2020. "Groundwater management under heterogeneous land tenure arrangements," Resource and Energy Economics, Elsevier, vol. 62(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. Holden, Stein T. & Otsuka, Keijiro, 2014. "The roles of land tenure reforms and land markets in the context of population growth and land use intensification in Africa," Food Policy, Elsevier, vol. 48(C), pages 88-97.
    2. Holden, Stein T. & Ali, Daniel & Deininger, Klaus & Hilhorst, Thea, 2016. "A Land Tenure Module for LSMS," CLTS Working Papers 1/16, Norwegian University of Life Sciences, Centre for Land Tenure Studies, revised 16 Oct 2019.
    3. Jun Yeong Lee & Grant Durbahn & Peter F. Orazem & Wendong Zhang, 2023. "The roles of risk preferences, selection, and uncertain returns on land contracts," Agricultural Economics, International Association of Agricultural Economists, vol. 54(2), pages 220-233, March.
    4. Kalkuhl, Matthias & Schwerhoff, Gregor & Waha, Katharina, 2020. "Land tenure, climate and risk management," Ecological Economics, Elsevier, vol. 171(C).
    5. Yashodha, Y., 2018. "Bargaining and Contract Choice: Evidence from Informal Groundwater Contracts," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 276035, International Association of Agricultural Economists.
    6. 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.
    7. Sen, Debapriya, 2011. "A theory of sharecropping: The role of price behavior and imperfect competition," Journal of Economic Behavior & Organization, Elsevier, vol. 80(1), pages 181-199.
    8. Pierre-André Chiappori & Bernard Salanié, 2002. "Testing Contract Theory : A Survey of Some Recent Work," Working Papers 2002-11, Center for Research in Economics and Statistics.
    9. Ananish Chaudhuri, 1997. "A Dynamic Model of Contractual Choice in Tenancy," Departmental Working Papers 199711, Rutgers University, Department of Economics.
    10. Holden, Stein T,, 2017. "Policies for Improved Food Security: - The Roles of Land Tenure Policies and Land Markets," CLTS Working Papers 9/17, Norwegian University of Life Sciences, Centre for Land Tenure Studies, revised 21 Oct 2019.
    11. 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.
    12. Konrad B Burchardi & Selim Gulesci & Benedetta Lerva & Munshi Sulaiman, 2019. "Moral Hazard: Experimental Evidence from Tenancy Contracts," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(1), pages 281-347.
    13. Aggarwal, Rimjhim M., 2007. "Role of risk sharing and transaction costs in contract choice: Theory and evidence from groundwater contracts," Journal of Economic Behavior & Organization, Elsevier, vol. 63(3), pages 475-496, July.
    14. Mary A. Burke, 2015. "The distributional effects of contractual norms: the case of cropshare agreements," Working Papers 15-7, Federal Reserve Bank of Boston.
    15. 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.
    16. Holden, Stein T., 2020. "Gender dimensions of land tenure reforms in Ethiopia 1995-2020," CLTS Working Papers 6/20, Norwegian University of Life Sciences, Centre for Land Tenure Studies.
    17. Ackerberg, Daniel A. & Botticini, Maristella, 2000. "The Choice of Agrarian Contracts in Early Renaissance Tuscany: Risk Sharing, Moral Hazard, or Capital Market Imperfections?," Explorations in Economic History, Elsevier, vol. 37(3), pages 241-257, July.
    18. Adamie, Birhanu Addisu, 2021. "Land property rights and household take-up of development programs: Evidence from land certification program in Ethiopia," World Development, Elsevier, vol. 147(C).
    19. Shunji Oniki & Melaku Berhe & Teklay Negash, 2020. "Role of Social Norms in Natural Resource Management: The Case of the Communal Land Distribution Program in Northern Ethiopia," Land, MDPI, vol. 9(2), pages 1-17, January.
    20. Huffman, Wallace E & Just, Richard E, 2004. "Implications of Agency Theory for Optimal Land Tenure Contracts," Economic Development and Cultural Change, University of Chicago Press, vol. 52(3), pages 617-642, April.

    More about this item

    Keywords

    Land rental contracts; sharecropping; output shares; endogenous matching; control function approach;
    All these keywords.

    JEL classification:

    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    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:hhs:nlsclt:2018_002. 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: Sarah Ephrida Tione (email available below). General contact details of provider: https://edirc.repec.org/data/ioumbno.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.