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Unfair incentives: A behavioural note on sharecropping

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  • Niels Kemper
  • Kristina Czura
  • Heiner Schumacher

Abstract

We conducted a laboratory‐in‐the‐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 a piece rate scheme framed as a profit‐sharing agreement. Sharecropping output was about 12 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 smaller than that of non‐sharecroppers, especially in a region where a controversial land reform took place. We argue that our subjects dislike sharecropping contracts because of the unfair profit sharing and the disputed allocation of land. Fairness concerns, therefore, may be another impediment to efficiency under the sharecropping contract.

Suggested Citation

  • Niels Kemper & Kristina Czura & Heiner Schumacher, 2018. "Unfair incentives: A behavioural note on sharecropping," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 26(2), pages 303-331, April.
    • Handle: RePEc:bla:etrans:v:26:y:2018:i:2:p:303-331
    DOI: 10.1111/ecot.12146
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    More about this item

    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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