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Reverse-Share-Tenancy and Marshallian Inefficiency: Bargaining Power of Landowners and the Sharecropper’s Productivity

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  • Ghebru, Hosaena H.
  • Holden, Stein T.

Abstract

Making use of a unique tenant-landlord matched data from the Tigray region of Ethiopia, we are able to show how strategic response of tenants - to varying economic and tenure security status of the landlords - is important in explaining productivity differentials of sharecroppers. The results show that sharecroppers’ yield are significantly lower on plots leased from landlords who are non-kin; female; with lower income generating opportunity; and tenure insecure households, than on plots leased from landlords with contrasting characteristics. While, on aggregate, the result shows no significant efficiency loss on kin-operated sharecropped plots, a more decomposed analyses indicate strong evidences of Marshallian inefficiency on kin-operated plots leased from landlords with weaker bargaining power and higher tenure insecurity. This study, thus, shows how failure to control for such heterogeneity of landowners' characteristics can explain the lack of clarity in the existing empirical literature on the extent of moral hazard problems in sharecropping contracts.

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Bibliographic Info

Paper provided by International Association of Agricultural Economists in its series 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil with number 126883.

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Date of creation: 2012
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Handle: RePEc:ags:iaae12:126883

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Keywords: Marshallian inefficiency; kinship; matching; Reverse-Share-Tenancy; Ethiopia; Crop Production/Industries; International Development; Land Economics/Use; D1; O13; O18; Q12; Q15;

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  1. Marcel Fafchamps, 2004. "Market Institutions in Sub-Saharan Africa: Theory and Evidence," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262062364.
  2. Naresh Sharma & Jean Dreze, 1996. "Sharecropping in a North Indian Village," The Journal of Development Studies, Taylor and Francis Journals, vol. 33(1), pages 1-39.
  3. Stein T. Holden & Klaus Deininger & Hosaena Ghebru, 2007. "Impacts of Low-Cost Land Certification on Investment and Productivity," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(2), pages 359-373.
  4. Gavian, Sarah & Ehui, Simeon, 1999. "Measuring the production efficiency of alternative land tenure contracts in a mixed crop-livestock system in Ethiopia," Agricultural Economics, Blackwell, vol. 20(1), pages 37-49, January.
  5. Seiichi Fukui, 1997. "The Meaning of Kinship in Sharecropping Contracts," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 394-406.
  6. Holden, Stein & Shiferaw, Bekele & Pender, John L., 2001. "Market imperfections and land productivity in the Ethiopian Highlands:," EPTD discussion papers 76, International Food Policy Research Institute (IFPRI).
  7. Al, C. & Arcand, J.L. & Ethier, F., 1996. "Moral Hazard and Marshallian Inefficiency: Evidence from Tunisia," Cahiers de recherche 9605, Universite de Montreal, Departement de sciences economiques.
  8. Shaban, Radwan Ali, 1987. "Testing between Competing Models of Sharecropping," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 893-920, October.
  9. Besley, Timothy & Coate, Stephen, 1995. "Group lending, repayment incentives and social collateral," Journal of Development Economics, Elsevier, vol. 46(1), pages 1-18, February.
  10. Sadoulet, Elisabeth & Fukui, Seiichi & Janvry, Alan de, 1994. "Efficient share tenancy contracts under risk: The case of two rice-growing villages in Thailand," Journal of Development Economics, Elsevier, vol. 45(2), pages 225-243, December.
  11. Deininger, Klaus & Ali, Daniel Ayalew & Holden, Stein & Zevenbergen, Jaap, 2007. "Rural land certification in Ethiopia : process, initial impact, and implications for other African countries," Policy Research Working Paper Series 4218, The World Bank.
  12. Stein Holden & Hailu Yohannes, 2002. "Land Redistribution, Tenure Insecurity, and Intensity of Production: A Study of Farm Households in Southern Ethiopia," Land Economics, University of Wisconsin Press, vol. 78(4), pages 573-590.
  13. John Pender & Marcel Fafchamps, 2006. "Land Lease Markets and Agricultural Efficiency in Ethiopia," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 15(2), pages 251-284, June.
  14. Jacoby, Hanan G. & Mansuri, Ghazala, 2007. "Incentives, supervision, and sharecropper productivity," Policy Research Working Paper Series 4125, The World Bank.
  15. Li, Guo & Rozelle, Scott & Brandt, Loren, 1998. "Tenure, land rights, and farmer investment incentives in China," Agricultural Economics, Blackwell, vol. 19(1-2), pages 63-71, September.
  16. Menale Kassie & Stein Holden, 2007. "Sharecropping efficiency in Ethiopia: threats of eviction and kinship," Agricultural Economics, International Association of Agricultural Economists, vol. 37(2-3), pages 179-188, 09.
  17. Bellemare, Marc F., 2010. "Insecure Land Rights and Share Tenancy in Madagascar," MPRA Paper 23640, University Library of Munich, Germany.
  18. Otsuka, Keijiro & Hayami, Yujiro, 1988. "Theories of Share Tenancy: A Critical Survey," Economic Development and Cultural Change, University of Chicago Press, vol. 37(1), pages 31-68, October.
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