2011•RePEc: Research Papers in EconomicsRequires access
On the existence of sharecropping
Daniel Ruiz Pérez, Kaniṣka Dam
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Abstract
When tenancy contracts are subject to ex-post limited liability, it is optimal for the landlord to offer the tenant the entire crop share since full incentive leads to higher production even in the bad state of the nature, which can be appropriated in the form of fixed rental payments. We show, in a simple model of incentive contracts where the tenant carries out multiple tasks, that effort substitution effect helps explain share tenancy even if there is limited liability in the ex-post sense.