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The (Im)Possibility of Reverse Share Tenancy

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  • Bellemare, Marc F.

Abstract

Under the assumption that the landlord is risk-neutral and the tenant is risk-averse, sharecropping is second-best in that it trades off risk sharing and incentives. Many, however, have reported instances of reverse share tenancy, or sharecropping in which the landlord is considerably poorer than the tenant. This note shows that reverse share tenancy is impossible under the canonical Stiglitzian model of sharecropping but becomes possible if and only if (i) both the landlord and the tenant can be assumed risk-averse; or (ii) there exist significant transactions costs making sharecropping more desirable than either a wage or fixed rent contract.

Suggested Citation

  • Bellemare, Marc F., 2009. "The (Im)Possibility of Reverse Share Tenancy," MPRA Paper 23681, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:23681
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    File URL: https://mpra.ub.uni-muenchen.de/23681/1/MPRA_paper_23681.pdf
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    References listed on IDEAS

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    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. Ghatak, Maitreesh & Pandey, Priyanka, 2000. "Contract choice in agriculture with joint moral hazard in effort and risk," Journal of Development Economics, Elsevier, vol. 63(2), pages 303-326, December.
    3. Patrick Bolton & Mathias Dewatripont, 2005. "Contract Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262025760, April.
    4. 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.
    5. Rogerson, William P, 1985. "The First-Order Approach to Principal-Agent Problems," Econometrica, Econometric Society, vol. 53(6), pages 1357-1367, November.
    6. Travis J. Lybbert & David R. Just, 2007. "Is Risk Aversion Really Correlated with Wealth? How Estimated Probabilities Introduce Spurious Correlation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(4), pages 964-979.
    7. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
    8. Marc F. Bellemare & Zachary S. Brown, 2010. "On the (Mis)Use of Wealth as a Proxy for Risk Aversion," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(1), pages 273-282.
    9. Holmstrom, Bengt & Milgrom, Paul, 1987. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Econometrica, Econometric Society, vol. 55(2), pages 303-328, March.
    10. Bellemare, Marc F., 2010. "Insecure Land Rights and Share Tenancy in Madagascar," MPRA Paper 23640, University Library of Munich, Germany.
    11. James A. Roumasset, 2002. "The Microeconomics of Agricultural Development in the Philippines," Working Papers 200210, University of Hawaii at Manoa, Department of Economics.
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    Cited by:

    1. Beyene, Abebe D. & Bezabih, Mintewab & Gebreegziabher, Zenebe, 2012. "Contract Duration under Incomplete Land Ownership Rights: Empirical Evidence from Rural Ethiopia," RFF Working Paper Series dp-12-09-efd, Resources for the Future.

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    More about this item

    Keywords

    Sharecropping; Reverse Share Tenancy; Transactions Cost;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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