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Unfair Incentives: A Behavioral Note on Sharecropping

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  • Schumacher, Heiner
  • Kemper, Niels

Abstract

We conducted a field experiment with real-life tenants in Ethiopia to test the incentive effects of fixed-wage, sharecropping, fixed-rent, and ownership contracts. The experimental task resembles a common process in agricultural production. The sharecropping contract is essentially a piece-rate scheme framed as a profit sharing agreement. The sharecropping output was about 11 percent smaller than the fixed-rent output. Surprisingly, it is statistically indistinguishable from the fixed-wage output, despite substantial piece rates. This effect is driven by real-life sharecroppers. Their sharecropping output was significantly smaller than that of non-sharecroppers, and in one region, it was even 10 percent lower than sharecroppers fixed-wage output. Based on qualitative interviews and historical accounts, we argue that our subjects dislike sharecropping contracts because of the unfair profit sharing and the controversial allocation of the land. The contractual performance may therefore depend on the perceived fairness of the incentive scheme.

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  • Schumacher, Heiner & Kemper, Niels, 2015. "Unfair Incentives: A Behavioral Note on Sharecropping," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112860, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc15:112860
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    Cited by:

    1. Hailekiros, Tekleyohannes & Gebremedhin, Berhanu & Tadesse, Tewodros, 2018. "Technical Inefficiency of Smallholder Wheat Production System: Empirical Study from Northern Ethiopia," Ethiopian Journal of Economics, Ethiopian Economics Association, vol. 27(02), October.

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    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • N50 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - General, International, or Comparative

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